Technology entrepreneur Bill Dobbie has revealed that his latest venture, a crowdfunding platform, has raised about £250,000 for small and medium-sized enterprises (SMEs) since it launched last month.
At the official unveiling of LendingCrowd yesterday, Dobbie said he wanted to offer “attractive returns” to investors while opening up new avenues of finance to companies.
He added: “My involvement in start-ups and SMEs made me realise the difficulties for small businesses to secure loans.
“We recognised that the traditional model of lending doesn’t work for all borrowers all of the time and wanted to develop a credible alternative.”
Dobbie, who co-founded dating website operator Cupid and web hosting specialist Iomart, is the chairman of Edinburgh-based LendingCrowd. He set up the firm with Stuart Lunn, a former equities analyst at Cenkos and Collins Stewart.
Lunn said: “Our aim is to offer a convenient and flexible alternative for SMEs to secure credit and grow their business.
“Technology is changing financial services, making it easier for the 4.9 million SMEs in the UK to access growth finance from investors.”
LendingCrowd, which is regulated by the Financial Conduct Authority, connects small businesses seeking loans of between £10,000 and £1 million with investors who could earn between 5.95 per cent and 13 per cent a year – before an annual 1 per cent fee and any losses due to default – depending on each company’s risk rating.
Investors set the interest rates they are prepared to offer businesses, who in turn receive the lowest rate on the loan.
The first business to secure a loan via the website was Vision Events, a Manchester audio-visual and events production agency that raised a “sizeable” sum to buy technical equipment.
Other firms to have used the platform include Fine Coffee Club, which supplies coffee capsules that are compatible with Nespresso machines, and fellow Edinburgh-based company Logicalware, an e-mail management specialist that counts electronics retailer Maplin and budget airline Ryanair among its clients.
Lunn said that LendingCrowd was planning to introduce a “secondary market” next month, giving people who have lent money to a company the chance to sell on their investment to someone else.
He added that the UK government is consulting on plans to enable so-called “peer-to-peer” loans to be held within a tax-free individual savings account (Isa).
“As and when that comes into being, it takes this into much more of a mass market. The number people in the UK across who have invested in these platforms is about 110,000. Put that in the context that 14 million Isas were opened last year.”
LendingCrowd has 12 employees, with a similar number of consultants and contractors, and Lunn said it aims to become a leading player in a market that includes rivals such as Funding Circle and Zopa.
“We’re not worried that we’re behind the curve – there is greater education about this model than there was four years ago, and we think what we’ve created is going to set us apart.”
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