Nicola Horlick: Heard of crowdfunding? Entrepreneurs certainly have
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Version 0 of 1. Seventy-five entrepreneurs met in Sheffield this week at an event organized by law firm Irwin Mitchell. They were asked a number of questions about crowdfunding. Their responses were fascinating. When asked what funding sources they were likely to pursue in the next 12 months, only 38 per cent said that they were looking to traditional routes such as a bank or a venture capital firm. The majority were looking to use some sort of crowdfunding, with 17 per cent saying that they were planning to borrow from a lending platform. Given that 92 per cent of small and medium-sized enterprise (SME) debt currently sits with the banks and only 8 per cent is provided by alternative-finance businesses, this suggests that the lending landscape is about to change. Indeed, in the US, 18 per cent of SME lending comes from alternative providers and 82 per cent from the banks and it looks as though we may be heading in the same direction. In the same survey, 73 per cent of respondents said they would consider lending through a person-to-person or person-to-business lending platform. Of course, this was a room of entrepreneurs, who are likely to be early adopters of new ways of doing business and are particularly internet savvy. Nonetheless, it is staggering that such a high proportion recognised the benefits of using a platform. I was recently talking to a Cambridge academic, an acknowledged expert in global crowdfunding. He told me only 3 per cent of people in the UK have heard of and fully understand the concept of crowdfunding. 73 per cent versus 3 per cent! We clearly have a huge educational job to do. The attendees in Sheffield were also asked why crowdfunding was gaining momentum in the UK and 63 per cent said that they believed that the growth was due to the difficulty that companies were having in getting finance from traditional sources. 29 per cent said that flexibility was a major factor that would lead them to seek finance from an alternative provider. It is true that the lack of credit available to many companies from the banks is driving them to lending platforms. It also true that once they get there, they are impressed by the flexibility offered. But it is not just companies that are benefiting from using lending platforms. Savers are able to get a significantly better return on their money. Our mission is to ensure that the wider public is aware of the benefits of lending through a platform. Nicola Horlick is CEO of Money&Co. (www.moneyandco.com) |