Partner Article

Crowdfunding regulation in the spotlight

This week, MPs debated the role of the financial services regulator in the growing crowdfunding market.

Labour MP Barry Sheerman, who lead the debate, suggested the UK could establish itself as a global leader in the crowdfunding field. The US has “strangled the baby at birth,” with regulation Mr Sheerman highlighted.

The issue appeared to escape the Chancellor’s Autumn Statement, but Sheerman is right - the sector is gaining momentum and many small enterprises could benefit from this alternative finance stream.

Credit risk consultant Mark Sommers, of 4most, neatly sums up the conundrum around regulation of crowdfunding: “Crowd-sourced lending is by its nature, a market; markets are good at discovering the price of commodity items which are easily transferable, be that company shares or bushels of corn.

“Loans to individuals and small companies are not in themselves a commodity. The loans are provided to individuals and small companies that differ widely in ability to repay and also in terms of how they might react in an economic downturn.”

With its associated risks, would you consider using a crowdfunding model to finance your business?

This was posted in Bdaily's Members' News section by Tom Keighley .