#Crowdfundingweek : The Crowd Vs Commercial Banking & State Efforts

Government after government have tried with varying degrees of success to direct finance to the the many small and medium sized enterprises across the UK, many of these SMEs have been let down to often. However entrepreneurs are increasingly turning to the crowd for finance, this was underlined for me recently when the state backed ‘Funding Circle’ which is one of the UK’s biggest crowdfunding platform. Crowdfunding has led to projects from 3D printing to social enterprises and growing renewable energy providers and new ideas and giving vital funds for general SME’s.

Many of the government’s programmes, big banks and big bodies failure to meet local business, cooperative and innovators needs, each failure has a cost that is immeasurable. We should be losing the chains from the local innovators and entrepreneurs, using the advancements in both technology and alternative finance is a must. This is fast becoming a growth area for financing of small companies and start-ups, this is only heading in one direction. There is a bigger societal reward for using alternative finance that merely feeding the cash starved companies and that is a longer term vision, a connection and commitment to the community that helped with the funds.

It is the small firms that have the ability to reach our communities, that come from our communities and indeed that serve them best and with over 60% of all private sector employment is in SMEs, it is paramount to get this funding right. Financing small enterprise, so that people who would rather work for, be part of, or create their own SME’s can do so should be the aim of all governments. It is small enterprise that creates the environment where inventions that solve everyday problems, societal problems are solved for more than profit and that solve the problems that would otherwise remain unsolved. With small enterprise, there is also stronger community relationships. This is exactly why it is the crowd that holds the key to the success of SME’s more than large companies and firms that can become detached.

With different projects and companies coming forward, it is the products and causes which are being given a new lease of life by the crowd, in an area where high street banks have been failing of late. The lower administration costs that come with crowdfunding also provide an edge over traditional funding stream thus it is not surprising that crowdfunding is leading the way in directing finance to where it is needed. Proof that crowdfunding is here to stay however is not just state backing but how people and highstreet banks are increasingly seeing it not as an option but a preference, Santander have been in talks with Funding Circle for example about handling loans to SME’s.

A benefit of the crowd both in terms of funding and receiving funds is the added support that is also available through certain forms of crowdfunding, more and more ways of using gathering the knowledge and resources of the crowd are surfacing, one such way is ‘Clarity Crowd’ a small crowdfunding site that offers advice alongside finance. The crowd has proven to be successful throughout and seems very adaptive engaging in different models for crowd-realisation. These platforms such as ‘Kickstarter’ and ‘Indiegogo’ to specialised platforms such as the more traditional ‘Community Shares’ platform to ‘Abundance’ for renewable energy.

However, despite all the great aspects of the crowd, belief in the crowd alone only takes us far. For the crowd to go to the next stage, modern technology, policy and indeed innovative engagement strategies are vital if it can be the future in the financing of new ideas. If the crowd can reach at least some of the places that currently are not being reached, then and only then do those ideas become real. Then we can move on from this unhealthy and toxic mix of a handful of banks holding all the vital finance needed for ideas to reach their potential. Have no doubt, this is part of the fight back against what seems like relative stagnation on the ground, let’s move forward together as a crowd, with only one thing left in our way, ourselves this battle is ours to win. To see what I think of the part the crowd can and will play in the renewable energy market I wrote this for The London Economic Last week. 

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