Crowdfunding can do Wonders for Your Community

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Julian Wells
3rd September 2012

When you think of what motivates you to use a local business, it’s usually the fact that it’s close so you can save cash travelling further, you could have used it before and had a good experience, or you might know the owner and want to feel you’re contributing towards the business succeeding.

There will almost certainly be indirect benefits of doing this if other members of the community act in the same way.

Without wishing to sound like a tourism plug for Royston Vasey, local businesses employ local people, who spend their wages locally, supporting other businesses and driving the local economy. In turn, this will bring outside investment and raise the stock of the area. It could prompt infrastructure improvements from local authorities and subsequently house prices increase… So the theory says.

But what if you could go one step further and benefit financially in a direct way from your support?

Crowdfunding offers businesses the chance to raise funds from a spread of investors and leverage their goodwill to drive performance, while investors can influence the success of their investment by using and promoting the products and services provided by the company they have invested in, receiving above average returns in the process.

Take this example. You invest a few hundred pounds in a dry cleaner as part of a crowdfunding loan of £10k so the business can buy new more efficient equipment and do more cleaning in one load, driving down its variable costs.

You would use the cleaner yourself and encourage your friends and colleagues to do the same. If the dry cleaner gains 20 new customers with average monthly bills of £40 each through your word of mouth alone, you’ve just increased turnover by £800 a month and will make money back on your investment.

Imagine you had agreed an interest rate of nine per cent too? That’s going to be a much better return than anything you’ll get from your savings provider and the dry cleaner is unlikely to get a better deal going to a high street bank for a loan or overdraft facility.

And because the middleman is just an online crowdfunding platform with minimal overheads, like the one provided by rebuildingsociety.com, there are no excessive fees to pay to bankers and the money can go from one investment to another, greasing the wheels of the local economy and creating value for everyone involved.

It’s the spirit of a co-operative for a 21st century audience.

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