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Peer2Peer Finance News | October 23, 2018

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Going for growth

Going for growth

Chris Hancock, founder and chief executive of Crowd2Fund, delves into the benefits of supporting early-stage businesses

ESTABLISHING – and growing – a small business can be fraught with challenges, especially when it comes to obtaining finance. A relatively short track record and irregular revenue streams can be a hurdle for the most promising of enterprises when they go to their high street bank for a loan.

This is where Crowd2Fund steps in, providing creditworthy, early-stage firms with the essential access to finance they need to spur their growth. Through its revenue loan product, the business lending platform provides flexible finance for businesses with varying monthly revenues, so that they are not committed to a fixed monthly repayment.

“I think it’s common sense, really,” says Chris Hancock, founder and chief executive of Crowd2Fund. “Coming from a family of small business owners, monthly working capital is often a problem.

“Furthermore, with technology and financial innovation, we can simplify the reporting process for them. By using payment partners and new systems we can also reduce management overheads.”

Crowd2Fund’s revenue loan product is aimed at small- and medium-sized companies that are looking to grow but have inconsistent monthly revenue, such as a seasonal business.

They need to have been profitable for six months and the minimum monthly payment is accrued interest plus 10 per cent. Terms are flexible, depending on how quickly the business pays off the loan.

“It’s a more expensive product, but it delivers value,” explains Hancock. “It’s about a modern credit assessment approach that works in partnership with the crowd and the general public, opening up a channel for businesses that cannot access credit easily.”

The product has proved popular and now makes up almost a third of Crowd2Fund’s loanbook. It has great benefits for investors too, who can enjoy impressive returns of up to 15 per cent without putting their money into high-risk ventures.

“These aren’t necessarily high-risk loans, they’re simply businesses that need more flexibility and are paying for that through higher APR,” adds Hancock.

Crowd2Fund also offers a venture debt product, suitable for high-growth companies that are not yet cashflow positive. Encroaching on a space usually dominated by equity crowdfunding, the venture debt loan enables fast-growing start-ups to scale up without giving away a stake in their business.

“These businesses wouldn’t be able to access credit from the mainstream credit market, but with the enhanced due diligence that we conduct on the businesses, we can clearly see that they are credit-worthy businesses,” says Hancock. “We take the growth factor into consideration a lot more than traditional credit modelling does.”

This is a higher-risk product, designed for more sophisticated investors, offering returns of up to 15 per cent.

Hancock envisages Crowd2Fund’s borrowers using a mix of the revenue loan and venture debt products, providing even greater flexibility for growing businesses.

“I think there’s going to be a big focus on venture finance and finance for earlier-stage businesses next year, as it’s those businesses that are solving our productivity problems,” he says. “So it’s really important that these businesses get the support and funding they need.”

Providing this support and funding to early-stage businesses is pivotal to Crowd2Fund’s ethos, with a view to benefitting the wider UK economy. It means investors can be similarly assured that their money is going to good use.

“I think we do pretty well in supporting early-stage businesses in the UK, but we can always do better,” Hancock asserts.

“With the risks to the economy such as Brexit, it’s important to make sure that there’s a big push for setting up new companies, creating jobs and generating productivity.”

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