Treasury News Network

Learn & Share the latest News & Analysis in Corporate Treasury

  1. Home
  2. Financing
  3. Financing Short-Medium Term Deficits

Corporate crowdfunding: The future of capital, banks not included?*

Crowdfunding for SMEs and large corporates is in its early stages, however, the signs are clear as to how it is going to work:

  • ArchOver, who claim to be the premier P2P business loans brand in the UK, say (just like a bank?), “We will work to understand your business and find the best solution using our platform.” And that, “We don’t ask for Personal Guarantees. We use innovative assets like Accounts Receivable, WIP or confirmed orders with insurance protection backup for our Lenders.” They lend at fixed rates from 7% depending on the loan term
  • Funding Circle in the UK, who have funded loans of over £506k, e.g. Michael from Bramley and Gage borrowed £25,000 from 248 people. They offer loans from £5k-£1milion on terms of up to 5 years, funds typically available within a week, and there is no early repayment fee.
  • In most crowdfunding platforms investers monies are ring fenced and managed separately, minimum investment is £1k, and they offer much better rates than banks.

Globally, the volume of corporate crowdfunding is low, but fast growing.

P2P crowdfunding is already big and will be huge

Massolution estimate that crowdfunding platforms had raised some $2.7 billion and successfully funded more than a million campaigns in 2012, according to a Massolution report, with an 81% increase to $5.1 billion expected for 2013. While a 2013 study commissioned by the World Bank  suggested that “By 2025, the global crowdfunding market could reach between $90 billion and $96 billion — roughly 1.8 times the size of the global venture capital industry today.”

There are multiple sources of crowdfunding as the Massolution study showed:


Source & Copyright©2015 -
Bruegel.org, Massolution, Payden&Rygel

Huge sums can be raised for small viable projects, e.g. Payden&Rygel report that “In 2011, 18-year old Palmer Luckey was hard at work in parents’ basement in Long Beach, California, piecing together virtual reality video gaming hardware. Unable to find ready money to fund his dream, Luckey took to Kickstarter (a P2P lending platform), posting his project and requesting $250,000. In 30 days he raised $2.4 million.”

What is even more surprising is that donation/reward based funding compaigns are successful for all sorts of projects from film & videos to dance, with almost half being funded.

Future of B2B crowdfunding 

All the successful P2P crowdfunding services use an online platform, as do the B2B crowdfunding services. Already online peer-to-peer financing is showing that traditional financial intermediaries, like banks and venture capital funds, may be increasingly marginalized by the online service providers. 

Paydent&Rygel conclude their review of crowdfunding with the comment that, “In our view, the emergence of crowdfunding should encourage investors to take a broader view of what constitutes financial intermediation, recognizing, just as in the 1970s with money market funds or the 1980s with high-yield bonds, that the financial system evolves whether or not we think it is right, wrong, dangerous or goofy.”

* title ‘borrowed’ from Payden&Rygel’s Point of View Summer 2014


CTMfile take: At moment the corporate crowdfunding platforms are not relevant to large corporates, but what if the minimum investment was £1m? £10m? £100m? Then there might be enough liquidity to attract borrowers from MNCs. The P2P funding platforms are maturing fast, and bigger players are buying into the market. Corporate crowdfunding potentially could be as big as high-yield bonds or even as money market funds.  

Like this item? Get our Weekly Update newsletter. Subscribe today

Add a comment

New comment submissions are moderated.