A couple of months ago, I had the opportunity to review the Rebuilding Society website. I had heard of crowd-funding and peer-to-peer lending before, so I was delighted to spend some time researching the concept. As I run a small business, it is always great to know the options that are available to us in terms of funding.
Lending via the Rebuilding Society
This time, I dealt with the Rebuilding Society as a lender, having £50 to lend to one of the companies listed on the Marketplace. I took a little while to choose a company to lend to, because I wanted to make sure that my money went to a company whose ethics I agreed with.
This is what I liked about the concept. Putting savings into a bank account earns a very low rate of interest these days. Other options include investing in the stock market or putting money into an investment fund. The problem I have with investment funds is that you can’t guarantee the ethics of the company that you are investing in. I have dealt in the stock market before but it is time consuming and risky, both things that I am unable to cope with at the moment.
How it works
The way that the Rebuilding Society is different is that all companies wishing to borrow money tell you about the company, what they do and their background. The Rebuilding Society grade companies according to risk in categories A to C, with C being the most risky. As you would expect, the more risky companies borrow at a higher rate of interest.
That said, none of these are hugely risky businesses. They are not start-ups with no background and history, they are profitable companies who need a bit of extra capital to expand, branch out or take on another area of work. I initially bid to invest in a company that related to photographic print, but I received an email after the closing date of the loan to say that there had not been enough interest in the company so I wouldn’t be able to lend to them. I therefore waited a little while to find another business that I liked the sound of.
My experience of the Rebuilding Society
This time, I have bid to invest in a company called Exquisite Handmade Cakes Ltd. They have been given a C risk rating, so I know that there is more of a risk that my money won’t be repaid. That said, they make cakes. What’s not to love? The loan is for £50,000 for sales and marketing, and I know first hand how expensive that can be. But if invested wisely, £50,000 will go a long way for a small business. What’s more, lenders can expect a great return on that investment.
Personally, if everything goes well, I will get an amazing rate of interest on my money. I have bid to lend to this company at their level C standard rate of 20%. This is a huge amount more than I would get in an ISA. I will definitely be pursuing this avenue of investment in the future. I would also consider requesting a micro-loan as a small business owner. You can find out more about the Rebuilding Society as both a borrower and a lender on their website.