Invest in Small Businesses like a Dragon
If you’ve watched the television show Dragons’ Den over the years, then you’ll know how profitable it can be to invest in small businesses and watch them grow. We only need to look at the success of Peter Jones’s investment in Levi Roots, the predicted future of Deborah Meaden’s ‘Gripit’ investment and the missed opportunity of widely purchased kids ‘Trunki’ case to see just how successful small businesses can become. Is investing in small businesses or business startups limited just to wealthy Dragon investors, though, or could you too get in on the action?
Here we look at two potential ways that you could become a ‘Dragon’ yourself by investing in or lending to small businesses.
Investing Through Crowdfunding
Over the last few years Crowdfunding has made its way from the niche to the mainstream markets. I’d say that you’d be hard pushed to find a lot of people who haven’t heard of it by now, or perhaps it just seems that way to me because I work online so come across the concept so regularly. Either way, Crowdfunding is one potential way that you could get involved with investing in growing businesses or startup businesses and if you pick the right companies to invest in and they make it big, the rewards could be substantial indeed. It’s important to note here that we are talking about Crowdfunding for equity investment, where you will receive an equity stake in the business rather than a fixed return.
What, though, if you would rather have a more stable or fixed return from your investment, rather than an equity stake? In this case you might want to think about peer-to-peer lending to businesses.
Peer-to-Peer Business Lending
Due to the phenomenal success of consumer peer-to-peer lending platforms in recent years, some players in the market have now also started lending to businesses too. Websites like LendingCrowd allow you to club together with other individuals who are also looking to lend out their cash, and to lend this money to small and medium sized businesses. While you do not receive an equity stake in a business this way, you will receive a healthy return on your investment as the loan is repaid.
Be Aware of the Risks
Here we’ve discussed two ways by which you can become your very own ‘Dragon’ and invest or lend your cash to small businesses. We should mention here that as with any investment, returns are often not guaranteed and your capital will likely be at risk, meaning you could get back less than your initial investment or in some cases you could even lose your whole investment.
Still, in such a low interest rate environment, this is a risk more and more individuals are feeling content to take in the hope of getting better returns on their cash than they would receive if they were to just leave it in the bank.
To learn more about government regulation of Crowdfunding and peer-to-peer lending, visit this page on the Financial Conduct Authority’s website.