Financing a start-up used to be a precarious task for entrepreneurs due to the amount of debt they would accrue just to get their project off the ground. The days of worrying about credit cards and bank managers, however, are gradually becoming a distant memory thanks to the rise of crowdfunding for start-ups.
The Rapid Growth of Crowdfunding for Equity
Crowdfunding for equity may not be the most obvious investment option available, but it’s hard to argue against its ever increasing rise in popularity with investors.
Since 2011, when it first started gathering pace in the UK, equity crowdfunding has been viewed as an attractive opportunity for investors. However, all investments come with a certain amount of risk and the more innovative the investment model, the more scepticism there is from investors.
One of the key components to successful crowdfunding is the involvement of angel investors who are proving to be a lucrative source of finance for businesses of all shapes and sizes.
It’s a good idea to understand exactly what an angel investor can bring to your business, so let’s take a look at their makeup and objectives.
It is no secret that as a society, we are quickly losing faith in the banking system. As technology continues to grow, there is a fast approaching sub-sector in alternative finance that could provide us with a solution. Crowdfunding platforms have completely transformed how we approach business through the medium of new technology. The good news doesn’t stop there.
You might think that with the budget of last week, it is all gloom for non-doms. However, it would pay to revisit a previous government initiative.
On 6 April 2012, the government introduced the very attractive Business Investment Relief (“BIR”) for non-UK domiciliaries. This is relevant if you are currently a resident in the UK, are treated for tax purposes as non- domiciled (non-dom), and have overseas income and gains.
The Millennial generation is increasingly interested in crowdfunding, an alternative financing system that allows members of the public to invest in a pitch before its completion. Many small companies have already caught onto this trend, and are using digital platforms to fund start-up and independent projects. However, crowdfunding isn’t just about getting a project completed.
On the first glance, It does not seem likely that the UK government would be that generous with its revenue. Nevertheless, these tax reliefs are available to investors in certain instances.
To be eligible for the relief, the company seeking the investment must have:
1. A permanent establishment in the UK for a period of 3 years from the issue of the shares.
2. All the money raised by the share issue must be used within two years in a ‘qualifying trade.’
3. The trade must be carried on by the parent company or subsidiary which is a 90% subsidiary for a period of 3 years from the issue of the shares.
Crowdfunding is a popular way for small companies to raise money and provides many marketing opportunities that would otherwise be unavailable. Since many ideas that are crowdfunded are innovative and exciting, it levels the playing field for smaller companies to develop their products. It can be challenging for companies to create a successful crowdfunding campaign, but when done correctly, crowdfunding can be extremely effective. It offers the company a loyal following and the investment needed to create new products and services.