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In a blog for the 
Telegraph, venture capitalist (and American), Julie Meyer, professed her admiration for the British tradition of networking, which it was doing ‘before it became fashionable’. “Leveraging networks is how successful entrepreneurs build game-changers”, she enthuses.
Meyer goes on to describe her recent positive interactions with a new breed of impressive tech start-ups spawning from east London and how the world is more connected than ever before, so it should be easier to move these exciting businesses forward.
Essentially, she makes an intrinsic link between the power of your network and the availability of finance, which is what the Commonwealth did for British business for years.
Although Meyer doesn’t mention crowdfunding (she talks about an invoice financing model to quicken the flow of capital between businesses), there is a clear connection and opportunity for it to play a part in the next stage of UK financial services.
Peer-to-business lending operates in an arena familiar to those who want to raise cash – tech entrepreneurs for example, and attracts those who know the banks and governments will do little for their cash – nullthat also favours everything online.
Think low, very low. It’s actually none. According to the website savingschampion.co.uk, there are no instant access savings accounts on the market at the moment that give basic rate taxpayers the power to beat CPI inflation. To do this they would need to pay 3.13% or higher, something achieved by six notice accounts and a range of cash ISAs, but nothing where you can get to your money easily.
There’s a mention of Barclays’ e-savings account which caught our eye, because a member of our team closed his account last year once he realised it was only paying 0.10% interest. It’s taking liberties even calling that a savings account…
Since the rebuildingsociety.com blog has been operational, it has covered the issue of SMEs struggling for commercial finance on several occasions. This time our comment has been inspired by a British Chamber of Commerce survey about trust in banks that got us wondering why people settle for conventional finance that might not be the best deal for their business.
Frugal businesses will reassess their supplier contracts to see if they’re getting the best deal for paper, printer ink and office rates, while consumers’ spending habits have been revolutionised by comparison websites, which challenge almost every outgoing to get the best deal.
We’re also in an age where people who can save you money, like Martin Lewis, have celebrity status.
So if getting value for money is so well ingrained into our culture, why hasn’t commercial finance caught up?
It must be an awareness issue, so that is why rebuildingsociety.com is engaging with business owners and advisers to spread the news that it will probably be cheaper, faster and less invasive than an application with a bank.
It’s common practice for banks to sell loans or credit facilities which factor in things out of the borrower’s control like interest rates or inflation and link them to repayments – it’s how so many businesses were missold interest rate swaps.
Crowdfunding loans through rebuildingsociety.com doesn’t work like that.
If a business takes out a loan using crowdfunding, the rate is fixed at the agreed level, regardless of whether the base rate shoots up from 0.5 per cent or stays the same over the period of the loan.
If you get a comparatively good rate now – so anything less than your bank is offering – you’ll be working with an even better comparative rate a few years down the line if the base rate has risen and your competitors are bleeding money to stay on top of their repayments.
Plus you can always repay a loan early should you have an especially profitable period.
The crowdfunding model was designed for flexibility, so if you pay off your loan, who are we to stop you?
Getting somewhere first usually has its advantages. The best seats in the cinema, the meat at a BBQ before you’re left with leaves and coleslaw, or a pair of shoes in your size for example.
It’s also good to be first with rebuildingsociety.com. By investing in our loan applications first you will be able to offer the highest rates and more likely to be accepted by our borrowers. Some competing sites have loan auctions that are oversubscribed and end up knocking out all the higher offered rates, great for the borrowers, but less so for the lenders.
Take advantage of your privileged position today by adding funds to your account through the dashboard and then visit the marketplace to invest in a business.
News this week that employees have to be offered a workplace pension will be a big boost for those whose employers had not previously offered it and should help people secure a better quality retirement.
But the pensions sector overall has taken a bit of a hit in recent years and it’s not just those without a pension at all who might want to reassess their retirement plans. Those who have retired are living for longer and drawing cash every week, while low interest rates and dysfunctional markets have lowered the overall value of funds and led to some being closed for new members.
In fact, traditional methods of saving for retirement have been well shaken since the credit crunch. How often have you heard someone refer to their second home or buy-to-let property as their retirement fund? As property values have fallen and plateaued, it’s certainly not as safe as it was a few years ago and a property that can’t sell is a big burden for anyone about to leave work.
No-one wants to compromise on their standard of living, so as the population lives for longer (men in the UK can now expect to live for another 17.8 years after reaching 65 and women another 20.4 years) it makes sense to provision in several ways for retirement, which is why some people are looking at investing in businesses for high returns as part of a varied portfolio.
At rebuildingsociety.com investments can range from a six month to five year repayment period, so you can tie your cash up for a little while or a long time and there’s always the option of selling your loan to another lender should you need to withdraw funds.
And because we don’t think pooling all your cash in one place is sensible either, our model allows investors to spread their investments over a number of businesses. It helps entrepreneurs because they’re getting cash at a cheaper rate than the bank would charge and adventurous investors might want to take a slice of a company in the future, so a crowdfunding round can be viewed as a trial run.
Everyone knows the internet is a wonderful thing. It connects people who are relevant to each other through LinkedIn, Twitter and the myriad of other social platforms available. It has also given birth to crowdfunding where social loans are often referred to as peer to peer lending.
Crowdfunding is a relatively new practice in financial services and is introducing a social element to the basic principles of lending and borrowing. The best known crowdfunding brands have a peer to peer model where individuals lend and borrow to each other via online marketplaces. However, the area of the market that seems set for the biggest growth over the next few years is peer to business lending – whereby unsecured commercial loans are funded by a portfolio of investors drawn from all walks of life.
The demand is certainly there for this product. According to the Federation of Small Businesses, 40 per cent of businesses that have applied for finance this year have been turned down. Many of them no doubt are clients of advisers reading this blog. Crowdfunding offers those advisers the chance to find their clients a solution, and earn introducer fees along the way.