There are further signs that the crowdfunding market is maturing. Today we look at our cousins in equity, crowdfunding sub-sector. The FT Adviser reports on a slowing in the rate of launches of Enterprise Investment Scheme offers (investments with EIS relief offer a 30 per cent tax break to investors – and many EIS offers are crowdfunded):
“A dramatic slide in the number of enterprise investment scheme offers in the first half of this tax year comes amid speculation that there will be a so-called “capacity crunch” with demand outweighing supply.
“The latest figures from alternative investment research firm Intelligent Partnership, indicate that between April and October last year there were 60 per cent fewer EIS offers compared to the same period in 2015.
“Investors can receive a 30 per cent tax break on income and do not face inheritance tax bills by investing in an enterprise investment scheme, which aims to help finance early-stage companies.
“Back in November 2015, a number of changes were made to EIS, with managers no longer being able to rely on renewable energy projects and restrictions being imposed on the age of the invested companies.
“Lisa Best, research manager at Intelligent Partnership, questioned whether managers were waiting until they were comfortable with the new rules before launching offers.”
News, New Offers & Risk
Equity investment is typically riskier than the more mature companies that peer-to-peer (P2P) lenders such as Money&Co. advance monies to. Here’s a Financial Times report from late 2015, which highlights this.
“According to the first comprehensive study of the fast-growing sector, by AltFi Data and law firm Nabarro, one in five companies that raised money on equity crowdfunding platforms between 2011 and 2013 has since gone bust – losing investors money.”
That said, equity investment can be very fruitful. Moreover, bear in mind P2P is definitely not foolproof. Capital loaned is also at risk. Lenders should always scrutinise individual loans carefully before committing capital. We have a string of exciting news in the pipeline, and also expect to have new loan offerings on site soon. Read warnings on site before committing cash.