Today’s edition for Love Lending Week is all about Crowdfunding and Peer to Peer lending (P2P) – two very different ways your idea or business can receive funding. We’ll explain what the two are and help you decide which is most appropriate.
Firstly, if you are a start-up with a fantastic business idea and need funding, then Crowdfunding is an option for you.
Crowdfunding is about pitching your idea to potential investors and if they believe in you and your idea they’ll help fund your venture – think Dragons Den. For their investment they would receive an equity stake in your business or some other reward for example one of the products you produce, but not cash.
Here are some great tips for Crowdfunding success.
How do I prepare for Crowdfunding?
First of all, you need to have a working business plan; make sure it is as detailed as possible so that potential investors can have a better understanding of the idea and the business model. You should also include cashflow projections for the next 3 years– it’s also very important to be as accurate and realistic as possible, overvaluing could hinder your chances of securing finance. Back this up with market research if possible to build a stronger case to help you secure funding.
Peer-to-Peer Lending (P2P)
Similarly to Crowdfunding, investors will fund your lending requirement after assessing your business, these investors could be family offices, other businesses or just individuals however for their investment they get a rate of interest return. They can offer many different lending types including; unsecured business loans, mortgages, invoice finance and asset finance. The difference from traditional lending is that the investors are lending direct to you, there is no middle man (the banks).
How do I prepare for P2P?
Make sure all your accounting information is up to date including management accounts. Have a clear idea of how you will use the funds raised and what difference this will make to your business. Generally your business will need to have traded for at least 2 years.
Fiducia P2P Success Story
· Has an established chain of fish and chip shops in Lincolnshire area
· Has purchased her 3rd premises but requires £100,000 to convert (currently a pub)
· Raised funds through Funding Circle in 6 hours!
· As unsecured loan no valuations or solicitors were required therefore client had the funds within a week
· She is already looking to purchase a 4th
Don’t worry, our consultants at Fiducia Commercial Solutions can advise and organise this for you, so give us an email or request a callback for advice.