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What do I need to know about Crowdfunding?

If you are thinking of raising money for your business via crowdfunding, you will need to know what the different types of crowdfunding are and what you will need to offer in return.

Here is a summary of the four main types of crowdfunding:

  1. Equity Based Crowdfunding – where investors receive a stake in the company as a return for their funds.
  2. Lending Based Crowdfunding – where investors’ money is repaid over time with interest. Also called peer-to-peer (p2p) lending, it allows for the lending of money while bypassing traditional banks.
  3. Reward Based Crowdfunding – backers receive a tangible item or service in return for their investment.
  4. Donation Based Crowdfunding – donors have a social or personal motivation for giving their money towards a project and do not expect anything in return.

Equity-based crowdfunding in particular has grown extremely quickly in the UK over the last few years, growing by more than 600% between 2012 and 2013. There was a total of around £4m raised in 2012, rising to more than £28m in 2013. The FCA regulations for crowdfunding that came into effect on 1st April 2014 have made the model more accessible to everyday investors and as such it is becoming a much more common way for businesses that have been denied bank funding to raise capital.

Wisteria can help your business to prepare a business plan to assist with crowdfunding applications. If you would like to find out more about how to raise money for your business via crowdfunding, please contact our business plan team on 020 8429 9245.