Despite the growth of alternative finance providers, it appears that many potential entrepreneurs are being held back by a lack of finance, with many having to resort to personal savings to finance their business idea.
That’s the finding of new research from Crowdfinders, which also shows that nearly half (45%) would not even know where to turn for funding – meaning 23 million people across Britain are unsure of how to fund a business.
Crowdfunding site Crowdfinders set out to guage the levels of public understanding of where to look for start up finance in order to set up a business. When asked “if you were to start or grow a business, where are you most likely to turn for the finance you need?” respondents said:
- Personal savings (35%)
- Banks and institutions (28%)
- Friends and family (15%)
- The sale of other assets (cars, collectables, luxury items, etc.) (11%)
- My existing job, my current business or my professional network (11%)
- A mortgage or I would re-mortgage my property (9%)
- Crowdfunding platforms (8%)
- Credit cards (7%)
- Bridging loans and specialist finance (6%)
- P2P lending platforms (5%)
- Venture capitalist and angel investment (5%)
- Private equity investment (4%)
‘More needs to be done’
Speaking about the research findings and the launch of the new platform, Luke Davis, Co-Founder of Crowdfinders, said: “There has been a long-standing issue in the world of business that typically only entrepreneurs with deep pockets or wealthy friends and family can access the capital they need to start or scale-up their business. The alternative finance revolution was meant to democratise access to funding; however, more needs to be done to connect entrepreneurs with potential investors so they no longer have to rely on personal savings or the bank of mum and dad.
“Crowdfinders’ new pre-crowd investment platform aims to level the playing field by helping entrepreneurs generate the first 30% of a funding round via its own network of investors. Not only does this early momentum dramatically increase the chances of a funding round successfully reaching its target, but the pre-crowd platform also ensures entrepreneurs can access scale-up investment without needing a network of wealthy contacts to get a business off the ground.”