14 British Crowd-Funding Businesses Cashing In On A Boom

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Forbes | David Prosser | Feb 5, 2014

Equity crowdfunding = selling securities on the internetBritain’s alternative finance industry continues to break new ground. The peer-to-peer lending sector more than doubled in size during 2013, new figures reveal, as the crowdfunding community stepped up its efforts to exploit the inability of the Britain’s banks to lend – and the lack of appetite among many customers to borrow from them.

In all, the UK’s peer-to-peer lending sector lent £843m last year, 121 per cent more than in 2013, according to data published this week by the Peer-to-Peer Finance Association – and the very fact the sector now has its own trade body tells its own story. More than 3,700 businesses borrowed money this way, while 70,000 consumers took loans. The supply side is equally buoyant, with 86,000 active lenders in the sector last year.

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Moreover, peer-to-peer finance represents just one part of the crowdfunding scene, with new models springing up all the time. An increasingly diverse sector hopes that official regulation, due to be implemented in April, will boost its appeal still further. Plans to offer tax breaks to investors in alternative finance, now being actively discussed by the Treasury, would be another shot in the arm.

That will no doubt prompt further launches in a business where first-mover advantage hasn’t always guaranteed success. For now, however, here’s 14 of the best British crowdfunding companies:

Peer-to-peer lenders

Zopa pioneered the crowdfunding model – its nine-year trading record makes it one of the world’s longest-established peer-to-peer lenders and its success has seen it widely imitated. It has so far lent more than £460 million to individuals and remains popular with lenders and borrowers alike.

Compared to Zopa, Ratesetter, launched in 2010 is the new kid on the block, but it has already managed to persuade savers to extend more than £170 million worth of loans to borrowers via its matched exchange model. Ratesetter hopes the fact that it operates a contingency fund, which kicks in when a borrower defaults, is a unique selling point.

Debt-based crowdfunding

Funding Circle wasn’t the first crowdfunding business to recognise that the fact Britain’s small and medium-sized enterprises were being starved of cash represented a business opportunity, but it is the most successful in its class. So far, it has funded £215 million worth of business loans – and its new venture in the US makes it Britain’s first crowdfunding exporter.

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ThinCats is one for the crowdfunding aficionados. Like Funding Circle, it matches individual investors with small businesses raising money, but suits more sophisticated types interested in delving deeper into borrowers’ backgrounds. A system of sponsors, who conduct due diligence on borrowers, has also proved popular and the site has now lent more than £50 million.

Leeds-based Rebuildingsociety.com has been up and running since September 2012. The site has some catching up to do – total advances currently stand at around £1.6 million – bit the business has a second string to its bow. It also builds crowdfunding platforms for third parties, both in the UK and abroad. It’s a useful diversification strategy.

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