Crowd for Angels is allowing companies to raise investment for the future fund on its platform, with investors able to put the money into an Innovative Finance ISA (IFISA).
The fund, which launched at the end of May and is delivered by the British Business Bank, offers convertible loans ranging from £125,000 to £5m from the government, subject to at least equal match funding from private investors. It will initially be open until the end of September.
A convertible note is a type of investment made initially by loans (notes) that can convert, or must later convert, in whole or in part, into shares of the company. It offers eight per cent in interest per annum payable at maturity or it is converted.
Businesses seek funding privately and then attempt to have this matched from the government scheme. Crowd for Angels allows firms to make up this private investment on the platform.
The crowdfunding platform accepts convertible notes, which investors are able to put into an IFISA.
Crowd for Angels has launched a pitch from one company, Beaconsoft Limited, to raise £125,000 on the platform and is in talks with more.
Interest earned on the convertible loan notes by investors will be subject to income tax but the platform’s IFISA can potentially shelter all or most of the income and gains.
Read more: Chancellor expands the future fund
“We use a debenture product so anyone coming to our platform to invest in this can do so in the IFISA and have a benefit of a tax shelter and earn,” said Tony De Nazareth, founder and director of Crowd for Angels.
“Seedrs are offering opportunities to raise funding for the future fund, but we have one step better than them – we can offer investment in an IFISA too.
“It’s quite a unique idea and is a good way for companies to attract investors and get publicity. I think it’s the best way to invest in the future fund, I don’t know another that gives them a tax benefit.
“The future fund is a complex product and if you want to invest in companies under the scheme, this is a good way to do so. We just have to be careful how we market it because being regulated we’re heavily restricted around financial promotions.”
De Nazareth is confident that Crowd for Angels will receive more future fund investments.
“The problem we have is we took a while to ensure we got this right and the first rush of companies seeking investment for the future fund has probably bypassed us, but we think the government will continue offering the scheme and will raise the £250m initial pool of funding,” he said.
Similarly, as part of its July relaunch, peer-to-peer lending platform Crowd2Fund aims to introduce a future fund product that has the ability for private investors to co-invest alongside the government, to give another source of capital for small- and medium-sized enterprises.