The continuing pressure for banks to improve their lending to small businesses could help make 2014 a take-off year for crowdfunding
The Financial Conduct Authority has already paved the way for the Chancellor to embrace alternative lending more openly with a set of new rules for the sector which will come into force in April. HM Revenue & Customs is already consulting informally on bringing crowdfunding within the Isa regime, and the move could be unveiled by the chancellor in his March budget.
"Consumers who want to invest in small or start-up businesses via crowdfunding platforms will in future receive clearer information about the business in which they are investing," the FCA has said. The changes relate to peer-to-peer lending and equity investment based crowdfunding.
Businesses can choose to offer crowdfunding investors equity in the business or some kind of rewards related to the company's products.
Glasgow Chamber of Commerce has reported that 54% of its members would consider crowdfunding, while those who had tried it typically raised less than £50,000.
Scottish pioneer BrewDog was so successful in its first £2 million crowdfunding exercise that it launched another this year to raise £4m.
Meanwhile, Arran Brewery is poised to launch a crowdfunding drive, which aims to raise £4m for expansion. It has earmarked the proceeds for a brewery, bottling hall and visitor centre at the former Rosebank Distillery in Falkirk and also hopes to expand its brewery on Arran.
Boss Gerald Michaluk said Arran needed economies of scale through the expansion of the brewery, but put investment plans on hold after the firm was refused a Scottish Government grant.
Fund industry entrepreneur Nicola Horlick is poised to launch her own crowdfunding business Money&Co. She says: "It is a smarter way for businesses to get the capital they need and for people to get a better return on their cash. At the moment, banks are not doing enough for credit-worthy businesses."
BloomVC.com, a Scottish crowdfunding platform, says 25% of the projects submitted to the site are from charities or non-profit ventures, and 50% of all money promised through BloomVC.com goes to charity projects.
Bloom has already generated more than £136,000 of funding for projects including a centre for Midwifery in Malawi and an orphanage in Rwanda.
Founder Amanda Boyle says: "Reward-based crowdfunding - real crowdfunding - is different.
"It is a genuine alternative finance solution, which allows people to support entrepreneurs or creative projects in exchange for personalised rewards."
It does seem to be catching on amongst investors.
Seedrs has promised local funds enabling investors to spread their cash across a group of 10 ventures, and the first in Bristol netted £150,000 from 134 investors in just one week.
The 10 will be chosen by a startup incubator Webstart Bristol, who will then provide an intensive 10-week programme of mentoring, guidance and professional services, along with office space for the duration of the programme.
The same model may be used by Entrepreneurial Spark. The Scottish growth business support hub is looking at launching its own crowdfunding platform following BrewDog's success.
Jeff Lynn, co-founder of Seedrs - the first platform of its kind to gain full regulatory approval and investment protection - said: "This shows not only the thirst that exists for investing in tech startups in Bristol, but also the appeal of offering a collection of selected startups, mentored and nurtured by an incubator, within a single fund."
Seedrs is designed to ensure Seed Enterprise Investment Scheme (SEIS) tax relief of up to 78% is available on investments.
However an FCA spokesman said: "We believe most crowdfunding should be targeted at investors who know how to value a start-up business, and who appreciate the risks involved and that they could lose all of their money.
"We want it to be clear that investors in the majority of crowdfunds have little or no protection if the business or project fails, and that they will probably lose all their investment if it does."
August saw the first high-profile collapse of a crowdfunded business, Bubble & Balm, a fairtrade soap maker that, in 2011, raised £75,000 from 82 investors subscribing between £10 and £7500 through the Crowdcube online platform.
The collapse came on the same day that fund manager Ms Horlick reported she had raised £150,000 through Seedrs in less than 24 hours for her Glentham Capital venture, which initially will provide finance for Hollywood films.
Fraser Campbell, Glasgow-based partner at accountants Campbell Dallas, has warned there is "scope for some people to be ripped off" as the whole area is uncharted territory because there is not enough history or track record to understand "what happens once it is time to repay the loans".
Andrew Hagger of Moneycomms.co.uk said: "Hopefully implementation of the proposals outlined by the FCA will weed out any providers that are not fit for purpose and allow the established players in the peer to peer market to continue to offer customers a credible alternative option to the banks."