Alternative financing for SMEs: Crowdfunding Platforms on the Increase

As banks continue to be accused of not providing enough credit for small start-up businesses and SMEs looking to expand, the market for alternative funding appears to be growing. This is evident in the increase of crowdfunding platforms in the UK – the majority of which were launched in the last few years.

According to new research from innovation foundation Nesta, crowdfunding, a method involving receiving money from a pool of individual investors rather than one large source such as a bank, expanded by more than 50% last year alone. The market continues to grow and there are now 87 active platforms in the UK.

This kind of financing, along with other alternative funding methods, managed to raise around £1 billion for businesses in 2013 and this is expected to rise to £1.6 billion in 2014.

Exploring crowdfunding opportunities for your business

It was Nesta that founded last year – a free directory website designed to help businesses and charities find the means to raise money.

This online resource allows users to filter through all of the different crowdfunding options available on the market in order to find a suitable arrangement based on the sector and type of funding being sought.

Liam Collins, Senior Researcher at Nesta, believes the demand for crowdfunding is growing as a result of modern technology and in response to the financial crisis making it more difficult to obtain funding through traditional means.

He said: “We’ve seen phenomenal growth in the number of platforms over the last five years, across every type from reward-based crowdfunding to peer-to-peer lending.

“Crowdfunding has proved immensely popular, both in the UK and globally, and these figures show that this trend is set to continue.”