Crowdfunding Bonds

Clubfinance can arrange or introduce Crowdfunding Bond investments (also known as 'Mini Bonds') on an execution-only basis. Arranging your investment through Clubfinance, you will receive:

• up to 75% rebate of Clubfinance's initial commissions*;
PLUS
• up to 75% rebate of any renewal (trail) commissions paid to Clubfinance*.

CLICK HERE FOR A LIST OF OPEN CROWDFUNDING BONDS & OUR DISCOUNTS

* Please refer to the Open Crowdfunding Bond page of our website for the rebate(s) applicable to a specific Crowdfunding Bond. Initial commission rebates may be paid as part of Clubfinance's annual commission rebate exercise.

Please note annual rebates are subject to a £20 minimum cheque payment when added to any other Clubfinance commission rebates or any outstanding rebates carried over from previous years. Dependent on the size and frequency of investments it is possible this minimum cheque threshold may not be reached.

Please note that any Crowdfunding Bond trail commission rebates are subject to Income Tax, and Clubfinance must deduct basic rate Income Tax from the payment to you.

Your initial investment is at risk and you could lose part or all of your initial investment. Clubfinance Ltd offers an execution-only service; Clubfinance does not give advice or recommendations. If you have any doubts as to the suitability of a particular Crowdfunding Bond, the agreement underlying it, or Crowdfunding Bonds (Mini-bonds) and Peer-to-Peer Lending in general, or you require advice of any kind, you should contact another appropriate firm that does give advice.

The Money Advice Service has produced some consumer information on Crowdfunding — please click here to access this information on their website.

What is a Crowdfunding Bond? 

Crowdfunding is a way for individuals and businesses to raise money from members of the public. For individuals the money raised will be in the form of a loan, but for businesses the money can be raised in the form 'equity' (shares in the business), or as 'debt', which is generally interest bearing.

Debt-based crowdfunding gives you (as an investor) the opportunity to lend money to individuals or businesses as an alternative to a bank or other financial institution or market. Whilst for individuals this will be in the form of a loan, for businesses raising debt finance, this could take the form of a loan or a bond.

These Crowdfunding Bonds or 'Crowd Bonds' are also referred to as 'Unlisted Debt Securities' or 'Mini-Bonds', to distinguish them from more mainstream corporate bonds listed on a stock exchange.

Any interest you receive can potentially benefit from the Personal Savings Allowance and therefore be tax free (see Tax Notes below). In the future, debt-based crowdfunding providers available through Clubfinance may offer these investments within an Innovative Finance ISA. Sign up to our e-mail updates above to find out when this happens.

Debt-based crowdfunding investments should not be viewed as an alternative to cash deposits. Although the intention is that the investor will receive interest and get their money back when the loan or bond is repaid, debt-based crowdfunding is much riskier than a savings account meaning that this may not happen. You should bear in mind that higher interest rates will usually correspond to higher risk. Please refer to Clubfinance's Additional Risk Warnings for Debt-based Crowdfunding and the relevant product documentation - you must understand the risks before making a decision to invest.

Through a Crowdfunding Bond a company can issue debt directly to investors. These 'minibonds' are generally designed to pay a fixed rate of interest over a fixed term, and repay the initial investment at the end of the term. The interest on the bond may either be payable at fixed intervals during the term or at the end of the term. It will rarely be possible to cash in a bond during the term.

In contrast, most Peer-to-Peer (P2P) Lending (in particular where loans are made to individuals) operates on a `many-to-many` basis, where many individuals usually lend to many other individuals or companies in an effort to spread risk.

As a new and developing area, Clubfinance's listing page covers some Unlisted Debt Securities (Crowdfunding Bonds), although we hope to add Peer-to-Peer Lending products in the future as well as Innovative Finance ISAs.

Risk Warnings 

Debt-based Crowdfunding ('Debt Crowdfunding') can be divided into Peer-to-Peer Lending ('P2P Loans') and Unlisted Debt Securities ('Crowd Bonds'). Both are typically offered via Crowdfunding Platforms.

Clubfinance Ltd offers an execution-only service; Clubfinance does not give advice or recommendations. If you have any doubts as to the suitability of a particular product or Debt Crowdfunding in general, or you require advice of any kind, you should seek a personal recommendation from a professional adviser.

Do not invest in a Debt Crowdfunding product unless you have carefully thought about whether you can afford it and whether it is right for you.

Please also refer to the risk warnings and other information contained within the product documentation relating to the Debt Crowdfunding product that you have chosen, together with Clubfinance's Terms of Business.

General

Innovative Finance ISAs

Taxation

Realising your investment

Non-readily realisable securities risk warnings 

What are the characteristics of non-readily realisable securities?

Risks

It is not possible to cover every risk in this document, but here are some important risk areas to consider.

Start-up business failures & the risk of capital loss

Most start-up businesses fail, so investors in them need to understand that it is likely they will lose 100% of any money invested, and they have little or no protection if the business or project fails. Therefore, do not invest any money you are not prepared to lose. The risk of capital loss, even if the business does not fail, is exacerbated if the price paid for a security is based on an over-valuation of the business, or if the security is a long-term debt security that will not return capital for periods such as 20-25 years. Investors should not invest in a start-up business unless they know how to value it, and/or have carried out their own due diligence on the investment professional who will make the investment on their behalf (e.g. an authorised and regulated investment manager).

No dividends and equity dilution

Dividends are usually rare or non-existent. Even if the company remains a going concern, investors in unlisted shares in a start-up or young company face the risk of never receiving a return on their investment if those controlling the company decide not to issue dividends. In addition, if the business is sold or becomes listed, investors may find their share in these profits (if any) is reduced if the value of shares is diluted by subsequent issues of new shares (which may include the grant of options to employees or directors for example). Investors need to understand that they will have almost no control over these decisions. In addition, new or existing shares may have more favourable rights (e.g. to dividends and/or sale proceeds) compared to those you invest in.

No secondary market - illiquidity

After purchasing unlisted equity or debt in a company, even if it remains a going-concern, investors will usually find there is no, or only a limited, secondary market for their investments. Investors need to understand that they will probably have to wait until an event occurs, such as the sale of the company, a management buy-out or a flotation, before getting a return on an equity investment (if any). Also, in the event of their death, ownership of these investments will probably need to be transferred the investor's beneficiaries, which may incur costs (e.g. administration and/or valuation charges).

Returns

Achieving a positive return when investing in unlisted securities is difficult and statistically unlikely. It can also take considerable time for a start-up business to generate a return, so investors must be prepared to wait until well into the future for a potential return.

Due diligence

It is difficult for an investor to assess the value of an investment and the likelihood of investment returns without access to reliable due diligence information. Investors need to be properly informed to ensure they can understand and assess what is involved. The due diligence could be carried out by: the investor; a third party (such as an authorised and regulated investment manager); or both.

So that they can make decisions on an informed basis, investors need to be satisfied that they have enough reliable information to enable them to understand:

Investor behaviour

Detrimental biases that can be relevant to non-readily realisable securities include (but are not limited to) the following.

Other risks, including investment-specific risks

Tax notes 

Income from both Peer-to-Peer Lending and Crowdfunding Bonds (if held outside an Innovative Finance ISA) is taxed in a similar way to interest on savings from a bank or building society account.

How to invest - the process 

Documents you need to read and retain can be accessed by clicking the icons against each Corwdfunding Bond offer on our Open Crowdfunding Bond page. If you have any difficulties please use the contact form below.

For new to Clubfinance clients, we will carry out an electronic identity verification check, but if this is not successful, we will request paper identification documents (see Identification Requirements Information for details).

Open Crowdfunding Bonds

The following shows a list of Crowdfunding Bonds (Mini Bonds) available for investment through Clubfinance. Please click on the Crowdfunding Bond for further details.

Alternate Energies Solar Bond
Data Centre (Birmingham) Bond
 

For product documents, or further information, including a Commission Statement, please see our list of currently available Crowdfunding Bonds. If you require any further information or clarification, please use the form below to contact us. Please remember we offer an execution-only service. Please contact a financial adviser if you need advice.

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Important Information

Clubfinance Ltd is authorised and regulated by the Financial Conduct Authority (firm reference no. 400139). Clubfinance offers an execution-only discount broker service; Clubfinance does not give advice or recommendations. If you have any doubt about the suitability of a particular product or service, or you require advice, you should seek a personal recommendation from an appropriate firm that does give advice. Clubfinance does not produce the products it arranges, or manage the underlying investments. Payments must not be made to Clubfinance, but to the relevant product provider. Contact details for Clubfinance can be found under 'contact'. Users of this website should be aware of the following:

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