The COVID-19 pandemic has highlighted the relationship we have with our communities, our high streets, and our local economies. With global travel likely to prove challenging for many months, the notion of a global citizen has been replaced with increasing support for our own neighbourhoods.
Businesses large and small have done outstanding work to support their communities over the past 12 months. As we emerge from the pandemic, we should grasp the opportunity to harness this and re-establish the link between businesses and their community, to the benefit of all.
Equity Crowdfunding is an exciting way to re-establish this link, providing SMEs with the finance they need to grow and offering the community and their customers the ability to take a stake in their success.
Crowdfunding comes in several shapes and sizes, but Equity Crowdfunding allows people to invest in a business in exchange for equity. The investors purchase a stake in the company, often only a small stake, and if the business grows the value of the investment rises – and vice versa.
It is an effective way for small businesses to raise finance, particularly to target growth.
According to the Office for National Statistics (ONS), the household savings ratio increased from 9.6% in Q1 2020 to 29.1% in Q2 2020, and during the height of lockdown households saved £54.6bn.
However, only 10% of households who reported increased savings had plans to spend it – with 70% preferring to lock money away in a savings account.
The result is a huge, largely untapped resource for small businesses and Crowdfunding represents an opportunity to bring fast-growing businesses, communities, and capital together.
With interest-rates for savings at historic lows and unlikely to rise in the short or medium-term, Crowdfunding can deliver benefits for all parties. In the search for improved yields for household savings, Crowdfunding offers a way of linking individuals with local businesses – maybe even those businesses they can see first-hand on their high street – to turbocharge their growth.
The Government, as it looks to unlock the potential of unprecedented household savings, would do well to use Equity Crowdfunding as the vehicle to achieve this. Rather than promoting high street spending, why not encourage direct investment in small businesses?
By utilising Equity Crowdfunding as we emerge from the COVID-19 pandemic, we can unlock the huge reserves of capital lying dormant, provide better returns for savers, and re-establish the link between small businesses and their communities.