The online peer to peer lending sector is growing in China as much as anywhere else, however enticements to get involved may spell bad news for naive investors. China’s alternative finance platforms are marketing themselves as a haven from the volatile stock market, encouraging people to invest in the midst of an unpredictable market; the Shanghai Composite Index surged 150% from July last year, before tumbling 25% last week. The government have recently put into place measures designed to stimulate and control the markets. Online platform Jimubox.com sent a message to clients saying that equities are going “insane” and offering cash incentives for investment, describing the alternative market as a safe investment. However, the peer-to-peer lending sector is very lightly regulated and the Yingcan Group estimates 1,500 of the platforms may go bankrupt or have difficulty paying dues, up from 275 in 2014. They estimate that an unprecedented 275,000 people put money into online lending firms in June, bringing the number of total users to 1.5 million. Shao Yifei, a finance-industry worker in Shanghai, bought into the haven argument, cashing out of the equity market halfway through its crash on June 26 and investing 50,000 yuan in a Web finance product funding small companies. “The online platform I use promises an annual return of as much as 9 percent,” said Shao. “I wasn’t confident the government would be able to stem the stock rout.” However, these online lending platforms come with risks that may not be sufficiently advertised, tempting thousands of people into investments that will ultimately tank. “The P2P industry is unhealthy and one can’t say investing in online lending products is safe,” said Ma Jun, chief researcher of Internet finance at Yingcan’s consulting unit. “Some irresponsible companies use high returns as a lure but don’t inform investors of the high risks. That forces some good firms to start providing similar risky products.”

Crowdfunding seems to be everywhere at the moment, but when you start looking into it, it’s easy to be confused by the option. It’s hard to tell who’s offering what, how much you’ll get as a return, sort the good from the bad and find out which one is best for your investment. To make things simpler, we’ve split the generic topic of ‘crowdfunding’ into five separate categories. Essentially, the first three are ideal for an investment – there is the possibility of making a little – or a lot – of money. However, the last two categories offer no financial returns, so it’s worth looking out for the difference when considering where to put your cash. 1. Equity Equity-based crowdfunding offers people the chance to invest in an unlisted company, in return for shares. If the company does well, their share will be worth more and they stand to profit. The opposite is also true; if the company fails investors can lose some, or all, of their investment. Examples: The Link app, Cake app, Seedrs, SyndicateRoom, Crowdcube 2. Debt Debt based crowdfunding, or ‘lending based’, is where the people give money to the business in the form of a loan. They will then eventually get their money back, plus interest accrued. Mini bonds are a form of debt based crowdfunding, where investors wil receive their money back at a set time when the bond matures. Examples: Hotcha bond, Square Pie bond, Perception Bi, Crowdcube, FundingTree 3. Revenue Revenue based crowdfunding is less common in the UK, and is really a branch of debt based. With a revenue loan, investors lend the company money which is then repaid as a percentage of company revenue. This is a more flexible option; there are no set repayment dates. If the company performs better than expected, the loan is paid back faster – if they underperform, there’s no pressure to pay back the debt by a certain date. So far, Crowd2Fund are the only platform offering revenue based loans in the UK. Examples: Ruroc, Crowd2Fund 4. Rewards Rewards-based crowdfunding offers people rewards in return for the money they give. This is often for projects or enterprises, rather than businesses in needs of finance. There are usually several tiers, whereby the more money they give the better the reward they receive. Examples: The Crystal Maze experience, on Indiegogo, Shenmue 3 game on Kickstarter 5. Donation Donation based crowdfunding is more like a form of charity, rather than an investment. There are many online platforms offering this, where people can ask for money for anything from college tuition to a project helping children in Africa. Examples: Gofundme.com, Justgiving    

Risk Reward, the global banking and financial services training, consultancy and recruitment specialist, is turning to crowdfunding to raise money to grow the business. Using FundingTree, they are looking for £250,000 in return for 5% equity. Risk Reward is based in London, and has recently opened an office in Miami to service its business in the Americas. The company specialises in risk and compliance training and recruitment, the fastest growing part of the sector. Clients include international training firms and specific banks including the British Bankers Association, GPS, MIS, Al Rajhi Bank, FBN, First Gulf Bank, HSBC, Lloyds Bank, Wells Fargo and many more prominent names. The company’s goals over the next year include additional development of expertise-led recruitment offering and growing the recently acquired Alan Buckley recruitment business. The business has been operating for 12 years, with Dennis Cox as CEO. He has 30 years experience and is assisted by a General Manager who is a chartered accountant with 30 years experience, a head of recruitment with 15 years experience and a Managing Director with 25 years experience. Recent valuations have put the company’s worth between £7-12 million. The expected return in a three-year period is 100%. For more information on this opportunity, visit FundingTree