Crowd2Fund explains how fintechs are well placed to support UK businesses at this challenging time…
The fintech sector will play a critical part in the global economic recovery. To prepare for what may be the most challenging economic recovery effort the United Kingdom and the globe has ever faced, we must mobilise our capability now.
Based on the recent government announcement from the Chancellor Rishi Sunak, we believe fintech will be a core part of releasing the £1.25bn Future Fund allocated to financial relief for innovative and fast-growing British businesses. This capital investment aims to ensure that the jobs of tomorrow will be both protected and created, just as innovation has powered the British economy for centuries.
A combination of government stimulus programmes and technology will accelerate the UK fintech sector into warp speed. Vast sums of capital will be mobilised for innovative businesses – creating jobs, prosperity, and amazing new products for consumers. At Crowd2Fund, we believe we will emerge from this crisis with a much fairer capitalist system.
It is great news and a promising endorsement for the sector to see fintech platforms being utilised to deploy emergency coronavirus business interruption scheme capital from HM Treasury – opening the door to further collaboration between the government and fintech platforms like Crowd2Fund.
Crowd2Fund was one of the first platforms to be approved for the Innovative Finance ISA in 2016, which has generated millions in private investment capital for British entrepreneurs and tax-free returns for private investors.
The government stimulus also dramatically shifts the credit cycle and investment landscape. Crowd2Fund is embracing this, and using this uncertain time to prepare our platform to emerge after the crisis stronger, and ready to meet future challenges.
Crowd2Fund will be applying to the British Business Bank to be a key pillar in this £1.25bn relief scheme for start-ups, as we are one of the only platforms that provide both debt and equity options for investors and entrepreneurs.
Since our inception seven years ago, we always believed that a combination of flexible funding options is best suited to today’s agile business needs. The platform has already started converting existing loans to the more flexible revenue loans, giving businesses relief, and mitigating against potential losses for investors during this extremely challenging time for everyone.
Under the new Future Fund scheme, loans will effectively be secured against company equity; this will likely change the profile of the listed businesses to earlier stage businesses that qualify for the revenue loan.
As always, a business will still be able to reduce the cost of credit through offering a reward and receive a discount on fees for bringing their own community of investors to the platform. Crucially, the government will provide additional, much-needed liquidity for innovative businesses, with an unprecedented 50 per cent match funding.
“The convertible loan is a brilliant idea from Chancellor Sunak, as it helps manage potential losses,” said Chris Hancock, founder and chief executive of Crowd2Fund. “As loans are secured with company equity at a fair valuation, debt crowdfund capital is much more suitable for a broader audience than equity crowdfunding, giving businesses and investors a clear structure for repayment.
“For this loan, business will need to be revenue generating, and be able to demonstrate growing revenues — this will be a key metric in the revised Crowd2Fund credit policy. We plan to have a modified credit policy and system prepared for this over the next few weeks, and will be giving the platform a full health check prior to launching this new product.
“Crowd2Fund is stepping up to meet the challenges of the current crisis and is using our time wisely to prepare for the economic recovery effort of a lifetime. We must all work in collaboration; not simply to preserve the pre-crisis economy, but to modify our agile fintech capabilities for the dramatically changing landscape.
“We will take this bold leap forwards in protecting and promoting the future of our country together.”
To find out more about Crowd2Fund’s plan, please go to: https://www.crowd2fund.com/news/supporting-the-effort-against-covid-19