- What is alternative finance?
Alternative finance is used to describe financial channels that have developed outside of traditional forms of finance such as banks, stocks, and bonds. Technology has been instrumental in the industry’s development and paved the way for online models such as equity and debt crowdfunding, rewards-based crowdfunding, and peer2peer (p2p or peer-to-peer) personal and business lending, all of which fall under the alternative finance umbrella. The term alternative finance also applies to angel investing, which sees affluent individuals invest their own wealth into a promising company whilst providing that SME with mentoring services to help them grow.
- What is crowdfunding?
Crowdfunding takes several forms: rewards/donation-based crowdfunding, equity crowdfunding, and debt crowdfunding. Crowdfunding is a way for individuals, businesses, or projects to raise money from a large group of people. The phenomenon has taken shape online in the last five years, enabling people and companies that list their venture on a crowdfunding platform to reach thousands of people to help kick-start or grow their idea by donating, lending, or investing in them.
- What is equity crowdfunding?
Equity crowdfunding enables a large number of people to invest into a company or project in exchange for a portion of equity, or a share, in that business. If that company does well and its value increases, so does the value of your share in it. Should that company perform poorly then the value of your share could also decline. The model has proven to be a popular source of SME investment predominantly for early-stage unlisted companies, although some listed companies have begun to explore equity crowdfunding.
The ‘crowd’ tends to consist of members of the general public, however some models allow more experienced investors to invest alongside the crowd.
- What is debt crowdfunding?
Debt crowdfunding is also known as peer2peer (p2p or peer-to-peer) lending. Unlike equity crowdfunding where investors take a share of that company, debt allows people to lend money to companies online. They then make their money back from interest on that loan. This is a way of early-stage companies to raise money without going to traditional banks for a loan.
- What is the difference between equity and debt crowdfunding?
Equity crowdfunding enables investors to purchase a share of a business, whereas investors that choose debt crowdfunding or peer2peer lend money to businesses for a return on that loan.
- How can finance events help me to raise investment?
Finance events are a great way to meet investors and network with like-minded entrepreneurs. Business owners can drum up investor interest in their product or service, and for a company that is considering crowdfunding this could be a productive way of generating additional traction in a campaign.
Finance events can improve your own awareness of the alternative finance market and the variety of available funding options to best suit your business.
Meeting other business owners at events can also help you share ideas, gain a greater understanding of your market, and discuss various ways to overcome any potential challenges.
- How can alternative finance events help me to meet entrepreneurs?
Alternative finance events attract a wide range of entrepreneurs that are exploring various routes to funding. Events like ours at Crowdfinders also feature live business pitches, so present a fantastic opportunity to meet entrepreneurs face to face that are actively seeking finance to grow their business.
- How do crowdfunding events work?
Although crowdfunding primarily functions online, live crowdfunding events allow entrepreneurs and investors to meet face to face, which they would otherwise not get the opportunity to do by making a transaction purely via a platform. Live crowdfunding events can instill greater levels of trust in a company, which is fundamental when investing, and they provide an invaluable opportunity for entrepreneurs and investors to ask one another questions and fully engage in what they each have to offer.
Live crowdfunding events like ours also give investors in the audience a chance to pledge investment to companies that deliver a live business pitch.
- What does sharing economy mean?
The sharing economy is a term used to describe the exchange of assets or services, sometimes for free and sometimes for profit. This form of peer2peer has grown exponentially due to improvements in technology and online communications. Lenders can generate extra revenue from their underused assets; rent out properties; and share everything from skills to transport and pets, whereas the borrower can access all kinds of resources for free or at a fraction of the price. Think BorrowMyDoggy, Airbnb, and UberPOOL.
- What is EIS?
The Enterprise Investment Scheme (EIS) is one of the few remaining government-backed tax-efficient investments for UK SMEs. The initiative was introduced in 1993-1994 to help generate SME investment for higher-risk companies by offering tax reliefs. Investors can benefit from up to 30% income tax relief for up to £1 million invested. For example, if an individual invested £100,000, that investment would actually cost £70,000. To find out more about EIS, visit the IW Capital website.
- What types of businesses are fundraising events suitable for?
Fundraising events are suitable for businesses of all shapes and sizes. Smaller companies could benefit from events that incorporate a live pitch element to promote their business model to an audience of investors, or larger companies can network, share ideas, and tackle contemporary issues in their sector. Whether you’re seeking start-up investment or funding for a scale-up, fundraising events are a very rewarding way of becoming immersed in the UK’s alternative finance community.
- How can I take part in alternative finance events?
Alternative finance events like the ones that we host are invitation only, or for our larger conferences you can purchase a ticket. All information about our upcoming events is hosted on our Events page, so click on the calendar to find a conference near you soon.
Or, if you’re a business owner and would like to pitch at one of our alternative finance events, visit our Race to Scale page to submit your business proposal for a chance to take part.
- What is growth capital?
Also known as expansion capital or growth equity, growth capital is private equity investment that can be used by expanding businesses to further their progression. Growth capital is generally for companies that are at a more mature stage in their development than businesses seeking venture capital. Growth capital could be used to put money towards a new website, hiring new members of the team, increasing marketing efforts, or for product development.
- What is Seed investment?
Seed capital or seed investment is the funding required in the really early stages of a business. This money is often generated from the entrepreneur’s own assets, their friends and family, crowdfunding, or angel investment. This form of start-up investment is usually exchanged for equity in that business.
- What SME mentoring opportunities are there and how do I reach out to them?
Angel investment – think Dragons’ Den – not only sees high-net-worth individuals invest in a company for an equity stake but they also offer SME mentoring and their own expertise to help guide that business. Networking and attending alternative finance events are a great way to meet potential angel investors and mentors, and if you don’t have access to an angel investor, there is a host of guidance pieces and mentoring resources online.
- What tax efficient investment opportunities are available that let me invest in UK companies?
Tax-efficient investments help UK companies to progress whilst offering tax-reliefs for the investor. Investment options that sit within a tax-efficient wrapper include the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), and Venture Capital Schemes (VCTs).