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At rebuildingsociety.com we believe in productivity over speculation. That means we believe money can be used effectively in the economy to create wealth for those who deserve it, rather than speculated by investment bankers with the profits siphoned off to the Cayman Islands, or big employers brought to the brink of collapse when it goes wrong.
The recent case of Kweku Adoboli, the trader jailed for nearly destroying UBS by burying his losses using false accounting, will be remembered as a landmark case in the same way Nick Leeson and Jerome Kerviel are.
Imagine if the £1.4bn Adoboli lost for UBS had been lent to profitable businesses with a history of good business practice and a desire to grow and create jobs?
“We’re a good business, with a good set of accounts and a clear vision of where we want to go”, says John Harbisher, a director of commercial vehicle mechanics M&J Commercials.
With a high standard of customer service at the heart of M&J’s proposition, John and fellow director Mark Wilson have grown the company to a staff of nine, including an apprentice, from a standing start in late 2007. They both used to work for a larger dealership, but decided they could do the job just as well themselves and set up on their own, and were incorporated in 2011.
And things are looking good too. John is confident of winning more business in the next couple of months that will require a further three mechanics and another two apprentices as the current crop moves on to working with tools and more experienced staff.
Innovations are often met with a great deal of scepticism and rightly so. There are enough examples of when the next big thing falls flat on its face to make everyone query whether something is too good to be true. Peer-to-business lending doesn’t fall into this category though, and in this blog I’ll explain why.
Julian Wells, marketing adviser and head of introducer channel, rebuildingsociety.com
In an age where marketing is everything and we’re constantly told how amazing products or services are, it’s only natural that crowdfunding, or peer-to-business lending as we call it at rebuildingsociety.com, is being looked at closely. This is a sector that is comfortable under the microscope, however, because what sets it apart is the reality that everyone is getting a good deal, there really are no losers as it stands.
Look at the facts. If you can lend money at over five per cent these days you’ve already got a better return than you get through savings. If you’re borrowing money, for many businesses anything at all is good, but especially when you can get loans from six per cent and above, that is an excellent deal. There’s capital in the business with no equity to give away in return.
Furthermore, the lending facilitators don’t need to take huge margins, very often they are technology companies playing a volume-based strategy that allows for the vast majority of the capital to flow freely from investor to borrower. It also means there is sufficient capacity to remunerate advisers who refer businesses. Perhaps the key to the long term success of this type of funding is trust.
Crowdfunding or peer-to-business lending is often seen as new and radical when explained to someone for the first time, but that person will begin to recognise the process all around them, particularly if they’re a football fan.
A prominent example at the moment is in Scottish football. Heart of Midlothian FC has appealed to supporters to pledge cash in return for a 10 per cent stake in the club, this is effectively a type of crowdfunding, but for equity. Those supporters know the chance of ever getting their money back is virtually nil such is the black hole of football finances, but they have come together financially to back a company all the same and will get some shares in return.
If the arrangement was under a peer-to-business lending scheme, Hearts would have to pay back supporters on a monthly basis as it would be a fixed rate loan, much like an ordinary bank loan.
However, looking at the financial history of Hearts, we would not list the business on rebuildingsociety.com’s marketplace because there is almost no chance of the club being able to repay it.
We were delighted to be featured in this article from Bridging & Commercial, published 6/10/2012
As a growing number of businesses turn to crowd funders as a route to source finance, B&C has taken a look at the alternative lenders offering these types of loans and specifically investigated the difference between crowdfunding and peer-to-peer lending…
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We’re delighted to have joined the Federation of Small Businesses – a move that’s synergistic with our ethos and the borrowers we’re engaging with.
Small businesses are the lifeblood of the UK’s economy, each year small and medium sized businesses take on around 1.3 million unemployed and disadvantaged people. In contrast, large firms with more than 250 employees hire less than 130,000 on average.
We believe in productivity over speculation, so capital is better deployed through businesses than speculated by banks. It keeps money in the economy, allows companies to employ people and rewards innovators. So we’re looking forward to working with other FSB members to help them access the finance they need through our peer-to-business lending model.
Companies looking to raise finance should register with rebuildingsociety.com and tell their story to our borrowers. It will heighten awareness of their company and expand their commercial finance opportunities in a notoriously difficult market.