Chris Hancock, founder and chief executive of Crowd2Fund, explains how his platform is ready and willing to support small businesses in their time of need
Crowd2Fund has always been a platform which values its small business borrowers. But as the coronavirus pandemic brings the economy to a standstill, the peer-to-peer lender is putting its money where its mouth is.
From the earliest stage of the pandemic, Crowd2Fund worked quickly to lay out a detailed action plan on its coronavirus response.
“We think that the crisis is going to be short term and we need to make sure that we’re in a position for the recovery when it happens,” says Chris Hancock, founder and chief executive of Crowd2Fund.
“That said, I think that the economic impact of the virus will be felt for a number of years to come. But a lot of the negative economic impact can be mitigated through good planning.”
Luckily, Crowd2Fund had already laid the groundwork for its pandemic response plan through its diligent underwriting strategy. By choosing an array of diverse, resilient borrowers, the platform has been able to keep its distress rate down. In fact, at the time of writing just 10 per cent of its borrowers have contacted Crowd2Fund about a potential distress.
Furthermore, a relatively niche lending product which was launched in 2015 has allowed the platform to offer immediate help to businesses, while still offering investors the types of returns that they have come to expect.
“Our revenue loan is a flexible loan for businesses that are seasonal or fast growth businesses,” explains Hancock. “Payments are flexible and tied to the revenue business – so during low revenue periods the payments are much lower and during busy periods the payments are higher.”
During the pandemic, this revenue loan offers a lifeline for businesses who can benefit from cheaper payments in their hour of need. What’s more, as an existing Crowd2Fund product, investors already understand how it works.
“Our position is – we want to help the businesses access emergency funding,” Hancock adds. “If they can’t access that emergency funding, then we can do a detailed view of the business to make sure that they are legitimately in distress.
“Those businesses which are distressed get a more flexible loan. And the investors – they might not see their capital inflate quite as quickly over the short term, but they will still be paid in line with the original term.”
When a distressed business contacts the platform, the first thing Crowd2Fund does is to offer assistance accessing government support.
Crowd2Fund is unusually well placed to seek out this government’s support. Hancock’s brother is the Health Secretary who has been leading the fight against coronavirus, and Crowd2Fund has developed well-established relationships with four key government departments: the Financial Conduct Authority (FCA), the British Business Bank (BBB), HM Treasury and the Department of International Trade. Crowd2Fund has also applied to the BBB to become one of the lenders that is authorised to deploy funds to small- and medium-sized enterprises (SMEs) during the pandemic.
It doesn’t stop there. The platform is also helping SMEs to seek out tax relief, reduced business rates and government grants. It is also helping its business borrowers to access newly-released government contracts for vaccines, innovations and ventilators, and Crowd2Fund has already helped to support a range of projects including titanium dioxide lights that may be able to kill the virus, emergency protective equipment, and manufactured parts for ventilators.
The platform has also decided to offer any employee of the NHS zero fees for six months as a “sign of appreciation for the amazing work they have been doing”.
Hancock calls this the ‘Dunkirk spirit’.
“It’s really important that we defeat the virus but at the same time this is going to be a massive change for all of us,” he says. “Therefore, we need to encourage businesses and our own platform to make sure we’re ready to get the economy on the mend as quickly as possible.
“After 10 years of testing, the naysayers have always said that the industry has never been through a full credit cycle or a market shock – well this is the ultimate test. We need to be at the front and centre of the current relief programme that is going on, mobilising our army of 15,000 entrepreneurial investors and businesses.”
Learn more about how Crowd2Fund are supporting their community: https://www.crowd2fund.com/news