Start-ups will always find a way of getting their business up and running, but finding investors isn’t always the easiest thing in the world. That’s why more and more fledgling businesses are turning to alternative financing to get a foot on the ladder, with crowdfunding becoming more popular than ever. For investors themselves, crowdfunding represents a fascinating opportunity for those who are looking to back the projects they have an interest in or are passionate about.
Crowdfunding platform Crowd for Angels (CFA) is a flagbearer for entrepreneurs looking to find investment via “Crowd Bonds”. Crowd for Angels is an FCA regulated crowdfunding platform and its goal is to bring innovative and appealing products to investors and to provide funding for companies throughout their growth cycle.
While Crowd Bonds have proved an effective investment tool for many start-ups – many people are still unsure as to what exactly they are. Put simply, Crowd Bonds are debt securities, which allow investors to lend money to UK companies. They are secured against the borrowing company’s assets and provide a regular flow of income, which can help in financial planning. Because Crowd Bonds can be included within the new IF-ISA “wrapper”, investors can also look forward to tax free returns – the IF-ISA (Innovative Finance Individual Savings Account) is a new category of ISA, which launched in 2016.
As an added incentive, Crowd for Angels recently announced that a 2% Annual Equivalent Rate (AER) is to be calculated on any IF-ISA cash balances from the date of opening until 15th June 2017.The interest payment (which does not qualify for a tax-exempt status under ISA rules), will be paid into a client’s IF-ISA as a single payment within three working days of the June deadline.
The Crowd for Angels’ ISA is free to open, available online 24/7 and offers a choice of UK companies to lend to. It takes less than five minutes to open. Clients can invest part or all their ISA allowance into an IF-ISA each year and can also transfer in any existing ISA funds from previous years.
Crowd for Angels CEO, Tony De Nazareth, comments: “With interest rates on Cash ISAs currently at an all-time low, we expect to see high demand for our Crowd Bonds. Investors willing to take on extra risk by lending to companies have the opportunity of making tax free returns of up to 12% per annum on our asset backed bonds, which compares to an average interest rate of just 0.64% on a Cash ISA.”
*The tax treatment of ISAs is subject to change and dependent on individual circumstances.