Keep it flexible – CrowdBnk calls for inclusion of both equity and debt crowdfunding within ISAs

CrowdBnk, the crowdfunding platform which was established in 2013, believes it is in the interests of both businesses and investors to widen the scope of investments allowable within ISAs by including both equity and debt crowdfunding.
The government’s consultation on crowdfunding closes this week, with the option to include both types of investment within ISAs.
A number of commentators have warned that allowing equity-based crowdfunding investments within ISAs is a step too far, exposing investors to excessive risk.
Equity-based investments in SMEs already enjoy favourable tax treatment, with relief through both the Seed Enterprise Investment Scheme, launched in 2013, and Enterprise Investment Schemes.
However, Ayan Mitra, chief executive of CrowdBnk, said a blanket exclusion of equity investments would be the wrong approach to take, and could lead to companies opting for debt-raisings over equity-raisings regardless of which one was actually more suitable.
“Like any investment, you have to do the due diligence before you invest,” Mitra said.
“We believe the best approach is to provide investors with the flexibility to decide what structure works for them, and by allowing both debt and equity crowdfunding investments within ISAs it could help more businesses which need funding.
“Creating the right structure for any crowdfunding project is crucial, and forms part of our CrowdBnk charter, a series of principles we follow to ensure clients only invest in the best possible deals. Conversely, allowing one form of capital-raising to be treated more favourably could cause problems in the future.”
While it seems likely only debt-based crowdfunding will be eligible for inclusion in ISAs, Mitra added it would nonetheless help accelerate the growth of an increasingly popular sector for investors.
“Some 23m British people have ISA accounts, which shelter cash or investments from capital gains tax and cap income tax at 10%,” he said.
“Now the annual savings limit has risen to £15,240 per person, it is the perfect time to expand the variety of investments which can be held within ISAs by including the increasingly popular crowdfunding market.”
As well as putting forward its views to HM Treasury on crowdfunding ahead of the close of the consultation, CrowdBnk has also created its own charter of core principles which it hopes will be adopted by the wider crowdfunding industry over time.
The charter is CrowdBnk’s commitment to investors, highlighting five key beliefs that it hopes will give investors the confidence to know that when they invest via CrowdBnk, they are being offered only the very best opportunities.
The charter’s five pledges are as follows:
Always invest
We only offer our clients genuine opportunities that we believe in. To prove our commitment to these businesses, CrowdBnk always invests alongside clients in every company which successfully funds on our platform.
Act as a filter
Our investment committee has decades of experience when it comes to both evaluating and running successful small businesses. It is their job to assess businesses on behalf of investors and either accept or reject them based on their fundamentals.
Be forensic
If a business is overvalued when it looks to raise capital, it will be that much harder for investors to make a real return. Therefore our investment team strives to only promote businesses which have realistic goals and accurate valuations that stand the test of time.
In practice, this means for every business we promote, at least 60 hours of research and analysis will have been carried out by our experienced team, covering everything from balance sheet strength to strategic growth plans.
Be inclusive
For too long, investing in exciting new businesses has been the preserve of the wealthy. CrowdBnk is challenging this with low minimum investments that help people access the best deals, regardless of how much money they have to invest.
Focus on the right structure
If businesses offer the wrong investment structure they can risk investor returns and business growth.
This is why CrowdBnk is focused on helping businesses to select the most beneficial investment structure for them, be it equity, debt or a blend of the two. This helps to provide a platform for better returns and a more effective capital raise.