Fundraiser Benefits

Posted on 01 March 2024

Developer Benefits - Raising Finance Through Simple Crowdfunding

What are the main benefits for property developers to raise finance through crowdfunding? 

Crowdfunding is an increasingly popular method of raising finance for property projects - from land opportunities to new build homes and everything in between.    

Property developers choose to raise finance via crowdfunding for several reasons, and there are various benefits associated with this approach: 

  1. Access to Capital: Crowdfunding provides property developers with access to a broader pool of potential investors, allowing them to raise capital from a large number of individuals rather than relying on more traditional financing sources. 
  2. Diversification of Funding Sources: Raising funds through crowdfunding allows developers to diversify their sources of funding. Instead of relying solely on finance from a single institution, they can secure smaller amounts from a diverse group of investors. 
  3. Market Validation: A successful crowdfunding campaign can serve as a form of market validation. If investors are willing to contribute funds to a project and back the developer, it may indicate strong interest in that developer, potentially attracting additional investors or buyers.  
  4. Marketing and Exposure:  The crowdfunding platform will market to their investors and social media followers. This helps developers showcase their business and projects to a wide audience, allowing them to extend their reach and exposure; far more than they can do by themselves. 
  5. Access ISA and SSAS Investments:  Some crowdfunding and peer to peer lending options are SSAS (pension) and ISA (Innovative Finance ISA) friendly, allowing investors to receive tax-free returns on their investments. Developers do not need to provide different offerings; investors can invest cash, ISA or SSAS funds into the same opportunity (subject to tax status). 
  6. Future Proof your Business:  By meeting (or even surpassing) investor expectations, you will deepen the relationships with your investors.  Investors will then be more likely to invest in your future projects, over and over again.  What a wonderful way to grow your business.
  7. Crowd Engagement: Crowdfunding platforms often provide a platform where developers can engage with the investor community.  Having conversations can help deepen relationships.  This in turn can create a ‘raving fan base’ of investors who love what you do.
  8. Flexible Funding Models: Crowdfunding platforms offer various funding models, such as equity-based or debt-based crowdfunding, or even a combination of the two. Developers can choose the model that best fits their needs and goals. 
  9. Lower Entry Barriers: Crowdfunding platforms may have lower entry barriers compared to traditional financing institutions, making it easier for smaller developers and businesses to access funding. 
  10. Financing Innovation: Crowdfunding introduces innovative financing models, enabling developers to explore new ways of raising capital that may not be available through traditional channels.  
It's important for property developers to carefully consider the crowdfunding platform they wish to work with, the terms, and conditions, and of course the regulatory environment, before choosing a partner to work with. Additionally, communication and transparency with investors is crucial for building trust and ensuring the success of your crowdfunding raise. 

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