A Different Approach to Business Crowdfunding | Prepaid365

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27 January 2014
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In a change to the usual processes of crowdfunding, a British website is taking a different approach by launching a fund for members of the public to donate to.

The plan will see people leave the decision of where exactly their money goes in the hands of a professional.

This should mean that educated financial decisions are made regarding each individual project, which could mean more people get a return on their investment.

Traditionally crowdfunding is where members of the public buy stakes in small unlisted businesses or pledge support to various projects.

A change in direction

However, Crowdcube is taking a different approach in a bid to expand the options available where alternative finance is concerned.

Tougher rules and regulations are expected to hit the crowdfunding sector, which originated as a way of raising money for various projects.

It has now expanded as an alternative method of finance and Crowdcube will attempt to use its 57,000 investors to assist companies.

The concept is the first of its kind and aims to help people who want to invest but who do not have the time or resources to review company pitches and make decisions themselves.

Professional assistance

Concerns have previously been raised that not all individuals are aware of the risks involved when it comes to investing in a start-up or early stage business.

Tougher financial regulations have been proposed, including limits on the proportion of a portfolio that people should hold in unlisted shares or debt securities.

This should protect inexperienced investors, while professional assistance should help to ensure that investments are made in the right projects.

The Crowdcube Venture Fund will allow this to occur and many other crowdfunding sources could follow suit if the idea is successful.  It could definitely be the start of something significant should it really take off.

A source of finance

To highlight the impact of crowdfunding, websites helped companies and individuals to raise $2.7 billion in 2012. This represented an overall increase of 81% on 2011.

However, crowdfunding and external investors are not the only way to generate funds to run a business. There are other ways in which businesses can help themselves by creating funds internally through savings.

Companies typically spend a fair bit of time and money managing and administering payroll and expenses for employees. However, smarter financial management of some of these activities through the use of business prepaid cards can help save resources and funds and make them available to drive business growth.

The use of prepaid payroll cards and corporate travel and expense cards is well documented within the business sector. Not only are funds protected, but there is direct control over the amount of money available on the card at any one time – and administrators usually have an audit trail to follow to monitor the use and potential abuse of funds.

Furthermore, since the cards are not linked directly to the company’s main bank or trading accounts, they also provide reduced exposure to fraud and hence may even reduce business insurances.

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