So my journey continues and I am just beginning to get under the skin of exactly what crowdlending means…
First of all, let me digress on a tangent to crowdfunding, which may be a buzzword that some people are already familiar with. As someone with an arts background I have certainly heard about similar things in the creative industries.
Fantastic ventures in any sector occur as a result of this type of funding where likeminded groups of people, unknown to each other but united through an interest, website or locality, could club together to invest in something that they believe in or would perhaps like to see happen in the future.
For example, making an independent film would have been in the past almost impossible without some hefty and risky investment or perhaps a film council grant. Nowadays, thanks to a slow economy and arts cutbacks the process is a-changing. Filmmakers could potentially post an idea on Kickstarter (other crowdfunding sites are available) and seek nominal amounts of cash from prospective funders, interested parties or fellow film enthusiasts (with some you can get involved from as little as $10 upwards).
With multiple parties making the same financial promise, the amounts soon add up and a group could make the impossible, possible. In return for your investment you may get your name on the credits, get a film t-shirt or something like a tour of the film set.
What a brilliant and empowering notion, not only for the individuals to be able to help create things that they believe in but also for the receivers to be able to produce their marvelous vision in a way that benefits more than themselves.
So, what about crowdlending. Well, apparently it’s exactly the same except for the – admitedly quite important – fact that whereas with crowdfunding you take a share in the company, with crowdlending, we’re just talking loans. For the borrower, that makes quite a difference. Instead of hundreds of shareholders complicating proceedings, they can hang on to all their equity but still get the finance they need in the form of a straightforward business loan. Yes – that loan is then made up of lots and lots of little loans from indvidual people you you and me – but none of that complexity gets transferred to the business.
Peer-to-peer (or, strictly speaking, peer to business) lending by FundingKnight allows investors to choose what companies or projects they believe in and lend money accordingly. FundingKnight will still run all sorts of credit checks on the business because of course you want your money to be secure, but why wouldn’t you want to lend your money to your local farm shop, co-operative or business enterprise? You can receive solid financial returns from something that makes not only makes your life better but also makes your community a better place to live.
In my mind, choosing where and how your money gets spent is a fantastic and unique concept that more people will turn to in the future as we gradually become more locally focused in our endeavours.
I am beginning to enjoy this learning curve. It’s positively infectious. Here’s to finding out more and inspiring each other.