Society Crowdfunds All the Time – It Just Doesn’t Know It

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Nick Moules
9th November 2012

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.

It’s hard to see the debt-based peer-to-business model ever working in sport because a supporter’s love for the team often overrides good business sense and it has become so common for clubs to ask fans to bail them out rather than offer a return.

We’re not in that market for good reasons, but we do use the principles in our business model.

We’re looking for borrowers who want to grow and develop their companies rather than just survive, which is why businesses listed on our platform have to be profitable and give our investors an excellent chance of getting their money back plus the interest they have agreed.

There’s scope for lenders to back businesses they admire or that are local to them, like the fans of Hearts are doing, but without being resigned to giving up their cash for good.

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