Developer Benefits: Raising Finance Through Property Crowdfunding

A 'simple' approach to property crowdfunding

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

The recent market conditions has resulted in property professionals seeking alternative methods of finance such as Raising Property Finance through Simple Crowdfunding.  

There are many benefits that property professionals enjoy when raising crowd finance, but before I run through some of these, I want to mention some of the areas where crowdfunding may not be suitable:

• Crowdfunding is not a ‘last resort’ finance option for your property project. If you have already exhausted every other avenue of finance, then consider restructuring the deal or not progressing.
• Raising finance through crowd will require you to provide concise, accurate information that will be reviewed by the platform. If you do not have the time or inclination to provide this, then your project is not likely to be listed.
• Make sure that you have control over the site or project first. Remember, this project is likely to be seen by many people and having it secured is better for you!

The main benefits of raising finance through property crowdfunding

For viable projects, crowdfunding is a wonderful way to raise finance for property.  There are many benefits of raising finance through crowd when done properly, some of which are listed below.

1.      Gain Access to an Investor Community

Raising finance through a crowdfunding platform lets you present your project and company to hundreds or thousands of potential new investors.  You have the ability to tap into the engaged community of investors looking for the right opportunity to back.

2.      Create a ‘Raving Fan Base’ who Love What You Do

Crowdfunding helps you to create a ‘raving fan base’, strengthening your brand and allowing you to shine.   Some platforms provide you with the opportunity to engage with investors through forums, learn whilst investing programs and more, all helping you develop more meaningful relationships with your investors.  

3.      Manage Many Investors and Simplify Paperwork and Communication

Whether you are raising loan (Peer to Peer) or equity finance, the crowdfunding platform has the technology and processes in place to manage multiple investors. This includes processing Anti-Money Laundering (AML) and Know Your Customer (KYC) checks, collection and distribution of funds and distribution of shareholder or loan agreements, which are all managed through the platform.

4. Stretch your Marketing Budget

The crowdfunding platform will also market your project to their investors and social media followers. This will help extend your reach and exposure, far more than you can do by yourself.

5. Future Proof your Business  

If you meet investor expectations or even surpass them, will help you deepen the relationships with your investors.  Investors will be keen to invest in your next projects, over and over again.  What a wonderful way to grow your business. 

So, how does it work?

There are three simple steps in the fundraiser journey:

• Package your project so that investors have the right information to decide whether to back your project.
• Marketing and promotion of the project so that we can provide the best opportunity of success.
• The final stage is the automated close so that we can release the funds to you as soon as possible.

 

We’ll discuss these in more detail below.

Step 1: Package the Investment Opportunity / Project

To kick off the fundraiser process, we will arrange a call or meeting to understand what you want to achieve.  We will explain and show you how the process works, the documentation that needs to be provided to support and get the project launched on the platform.  Once both parties agree the project is viable for Crowdfunding, we will forward a 2-stage enquiry form for the Fundraiser to complete:

• ‘Viability’ Stage: high level personal, company, project and financial information – returns you are offering, GDV, timelines, etc.
• ‘Raise Ready’ Stage: detailed personal, company, business/financial/marketing plans, exit strategies, company bank details, Specific SPV information, downloadable information, e.g. planning permissions, architect drawings, etc.

Not all of this information will  be visible to the public, as some of it is required for our compliance process. 

It’s important to understand from the start, that crowdfunding requires significant involvement by you, the fundraiser.  You need to ensure that the information required is provided to us in a timely manner.

Once all information has been received, the project goes through an internal assessment and project review before launch.  Once approved, we will then open this project up for investment on the platform.  Getting your project live on the site can take from a few days to a few weeks, depending on your information available.

Step 2: Promote the Investment Opportunity / Project

In this stage the marketing plan needs to be executed and the project promoted to the investor crowd.  This is a joint effort.  Simple Crowdfunding will inform their investor base through various media channels.  The fundraiser will also talk about the project and it's launch.   All marketing material will need to have been prepared beforehand, including video, photography, CGI’s, ads, etc. 

When the investment opportunity is open for funding, investors may ask questions about the project when doing their review. This will help them to decide whether to invest.   We will work together to get these questions answered. The maximum time for a project to reach its funding goal is also variable, from a few hours to a few weeks. 

Step 3: Funds Released

Once the project has reached it's minimum target and closes, the funds will be transferred to the business on completion of the closing paperwork.   

Simple Crowdfunding has an automated closing process to manage your shareholder / loan agreements and also your funds transfer so that you do not need to manage this manually.  The time frame for completing the legal documentation and transferring the funds over to you is up to four weeks. 

Once the funds are released to you, you will be able to continue engagement with your investors through the project 'Forum' on our platform.  The forum is open to all registered users when the investment opportunity is open for funding and becomes private and only available to investors in the project when closed.  

Conclusion:  Summarising the key benefits for fundraisers

Our property crowdfunding platform offers various benefits fundraisers enjoy:

• Access to our engaging investor community   
• A supportive team on-hand throughout     
• An FCA authorised platform     
• Simplification of paperwork    
• Flexibility    
• Building a community who love what you do        
• We help you extend your brand and reach 

If you want to find out more about raising finance for your property projects, join our growing online property community: www.SimpleCrowdfunding.co.uk


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