The regulation of Crowdcube has probably come as welcome news for the investor population? Crowd funding will hopefully provide good returns for investors, especially those who take the time to check out business plans and competitor analysis thoroughly!
I hope the new FSA(or son of FSA) regulated status will aid Investor confidence and improve Crowd Cube fund raising/funding capacity. Whilst £5M since launch in Feb 2011 is a good start, to make a significant dent in the demand, Crowd Cube and other
alternative lenders will need a lot more investment, and investor confidence.
Currently the Sales turnover funding industry is not regulated as its model is not loan based - but is driven via the purchase of a percentage of equity in future credit card recievables, through a process known as a business cash advance.....Using its own
funds from the USA, www.boostcapital.co.uk has delivered signficant SME business growth funding to high street Britain… (not the domain targeted by crowdcube admittedly). As the model is card sales based, Boost
Capital targets a different market than Crowdcube and does not have to deal with the complex initial overhead of raising funds from Private investors. Taking only a temporary equity share in the future credit and debit card sales of a merchant (until funding
is repaid) there is no long term partnership issue to worry about, so a very different model indeed.
It is true that there is a growing demand for non-bank SME finance in the UK. the current banking situation has created a fertile environment for creative approaches to historic SME funding problems, therefore we should hope to see more regulatory announcements
as the alternative finance industry for SME's gathers way, and the regulators realise that they need to respond positively to embrace and manage to what has become a very dynamic market indeed!