Crowdfunding: The next bubble to burst?

Posted on 08-20-2015 by
Tags: legal profession , Latest Headlines & Stories , trending news

In need of help financially for a personal venture ? Don’t sweat it. In today’s technologically-advanced society, all we need to do to solve this dilemma is crowdsource. This peer-to-peer lending, while helpful, could be set itself up to be a bubble that bursts.

According to  David Postings, Chief Executive of Britain's Bibby Financial services, new crowdfunding platforms don’t offer base capital and no guarantees, which leaves smaller investors at risk.

In a research study in the  Cornell International Law Journal, crowdfunding has seen growth worldwide. The study however warns that the industry will depend highly upon set regulations and the digital medium which the practice is built on. The study notes there are good reasons for the regulations that are put in place, stating:

"The motivation to keep investors away from public offerings by startup companies is largely driven by the notion that, because of their inherent volatility, small businesses make extremely risky investments and are hard to accurately value."

If you are having trouble deciding between “peer-to-peer” and alternative financing, consider alternative ways:

 “Small businesses who apply for capital through online lenders are connected with products and services meant to deliver cash faster than through the traditional application process with banks, using algorithms to assess risk, loan amounts and structure repayment schedules that work for both lender and borrower.”

Cash advances with repayment schedules based on daily earnings, and merchant cash advance options tied to credit card payments allow for increased cash flow without the need to build campaigns and wait for those donors to follow through with payment.”

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Posted on : 24 Aug 2015 6:10 AM

Crowdfunding initailly was very simple. Entrepreneurs and business people posted their ideas; and small investors would put in a few bucks to make things happen. Crowdfunding has the potential to revolutionize how entrepreneurs raise capital but this particular problem could prove it difficult to gain the trust of investors!

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