A CROWD funding platform aimed at supporting businesses in Scotland is to launch this month as credit from traditional lenders continues to dwindle.
Squareknot will focus on a range of projects with funding requirements ranging between £10,000 and £300,000. Co-founder Derek Bond, who was a former finance director of Mercedes dealer John R Weir until the firm was sold to Arnold Clark, said: “I have been overwhelmed with the positive feedback I’ve received from everyone I have spoken to about what we are doing. Hopefully, we are going to make a significant contribution to the Scottish business community, particularly for start-up businesses who are currently finding it extremely difficult to raise seed funding.”
Stewart Geddes, a consultant with Squareknot and a former real estate finance banker with RBS, explained the platform will work with a range of ventures – including aspiring film-makers and other services businesses – but will also target a “big gap in the market” by funding small residential developers that are currently struggling to attract funding.
“There is a big market for finance which is not being tapped and which has tremendous potential in the right hands and with the right sort of structuring,” said Geddes.
“The banks have exited the property development market at the bottom end. It will lend to established traders with an established track record. But there are any number of small- scale developers out there who have got a plot of land they own outright, they have planning consent, the land has a value, but they cannot raise the funding to actually build the houses.”
Squareknot will recruit investors looking to back projects with both loans and equity. Pitches listed on the Squareknot website will incur a £500 registration fee and the firm will also take a 5 per cent cut of funds raised.
Geddes said Squareknot is applying to register with the Financial Conduct Authority (FCA), although it is not required to do so. The FCA’s predecessor, the Financial Services Authority, warned that the majority of crowd funding schemes do not offer investors recourse to the Financial Services Compensation Scheme if investments turn sour. Every crowd funding platform currently makes its own assessment as to whether it needs to be regulated by the FCA to conduct its business.
He said: “Crowd funding in its widest sense is a risky business. You might get better odds in the 2:30 at Musselburgh. We are effectively a shop window, not unlike an estate agent. If you like what you see, put an offer in. Investors won’t have to pay up until the project has raised 100 per cent of its funding.”
The team also includes chartered accountant and business angel Tom Preston, serial executive Brian Smillie snr, marketer Brian Smillie jnr, chartered accountant Iain Webster and corporate lawyer Iain Young.