Crowdfunding for business: the main types and the rules

Crowdfunding is raising money from many people, each giving or lending a small amount, usually through an online platform. The FCA explains that the websites or apps typically charge the company raising the money a fee, and that most work on an all-or-nothing basis.

What backers receive in return is what separates the types. Some give for a cause, some get a product, some are repaid with interest and some receive shares. That choice decides how much the money costs you and which rules apply.

The FCA describes four types: donation-based, rewards-based, loan-based (peer-to-peer) and investment-based. The FCA regulates the last two; donation and rewards-based crowdfunding are not regulated by it, although it does regulate payment services in some circumstances.

Loan-based crowdfunding is covered in detail in peer-to-peer business lending. The rest of this guide concentrates on the models that raise money without borrowing.

Equity crowdfunding gives backers a share of the company, while rewards crowdfunding gives them a product or perk and no ownership. One is a sale of part of the business; the other is closer to pre-selling what you make.

• Rewards: no shares are issued and no one owns part of the company. The risk is delivery: backers expect the reward.
• Equity: you issue new shares. Backers become shareholders, so the cap table, voting rights and future funding rounds change.

Equity raises are closer to angel investment, except that the shareholders are many people, not one or two experienced investors. Both are about selling shares, which is why neither is debt.

The rules depend on the model. Equity and loan-based platforms are FCA-regulated, and company law adds its own requirements when you issue shares. This is general information, not legal advice, so involve a solicitor before you issue shares.

• Platforms: the FCA says to use its Firm Checker to confirm that a firm is authorised and registered, and for what.
• Offering shares to the public: section 755 of the Companies Act 2006 says a private company limited by shares must not offer its securities to the public. How an equity raise is structured is a question for a solicitor and the platform.
• Registering new shares: a company must deliver a return of allotment to Companies House within one month of allotting shares.
• Promises to backers: in a rewards campaign, describe the reward accurately and be realistic about delivery.

Platforms charge fees, and the FCA says they typically charge the company raising the money. The amount and structure differ by platform, so read the fee schedule before you commit. Payment processing and the time spent on marketing the campaign are also costs.

Equity has a cost that does not appear on an invoice: ownership. Each share you sell reduces your percentage of the company and may give new shareholders rights. A loan costs interest but leaves ownership alone. Our guide to how to value a business helps you judge what a stake is worth before you sell it.

Sometimes. Companies can raise money under the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS), which give tax relief to individual investors who buy new shares, but only if the company and the share issue meet HMRC’s rules.

As of October 2026, GOV.UK says a company can receive a maximum of £250,000 through SEIS and that tax reliefs will be withdrawn from investors if the rules are not followed for at least three years after the investment. Companies can ask HMRC for advance assurance before they go ahead. The detail is in our guide to SEIS and EIS, and an accountant should confirm eligibility.

The main risks are missing the target, taking on shareholders or obligations you did not plan for, and damage to your reputation if you fail to deliver. The FCA adds that returns for backers are not guaranteed and they may lose everything, so a campaign needs honest messaging.

• An all-or-nothing campaign that falls short returns the money and costs you the time spent.
• Public campaigns put your plans and figures in front of competitors.
• Many small shareholders can make later funding rounds and decisions more complicated.
• Rewards that take longer or cost more than expected can drain cash.

Borrow if you want to keep full ownership and can afford repayments; crowdfund if you want to test demand, build a customer base or raise equity and are willing to share the company. The two are not exclusive, and some businesses use both.

A new business should also weigh start up business loans and small business grants. Whichever route you choose, a clear business plan helps backers and lenders alike.

Capzy is a credit broker, not a lender, and is paid by the lender. We arrange debt finance, not investment, so we do not run crowdfunding campaigns or find equity investors. If borrowing is the better fit, we introduce you to lenders and show what comes back so you can compare it.

You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and any offer is subject to status and lender criteria.