SCOTTISH companies raised more than £27 million through crowdfunding last year as the model cemented its credibility as a means of raising finance for business growth and expansion.

The amount raised by firms in Scotland, on the three main platforms of peer to peer lending, reward campaigns and equity crowdfunding, eclipsed the £1m recorded in 2013 – the last time the market was valued.

And Scotland’s share of the total funding raised across the UK through alternative finance was measured at four per cent. That contrasts sharply with 2012, when Scottish businesses raised less than one per cent of the £200m total across the UK, as recorded by the first Scottish Crowdfunding Report in 2013.

The 2016 report, commissioned by Glasgow Chamber of Commerce, Harper Macleod, Lending Crowd and Santander, found that 1,273 crowdfunding campaigns were successfully staged by Scottish companies in a wide range of sectors between October 2014 and September.

The bulk of the funding raised, £20,529,000 of the £27,064,371 total, came through peer to peer lending, which was largely invested in businesses looking to finance growth and expansion.

While crowdfunding has traditionally been associated with fashionable start-ups like craft brewers, companies in the engineering and manufacturing sectors benefited most from “crowdlending”, the report found. Those sectors raised £4m from 55 loans, with property and construction the next major beneficiary of peer to peer lending, receiving £2.7m from 62 loans.

The average value of a loan was £50,000 with a typical interest rate of 10 per cent spread over 47 months, the report found.

Stuart Patrick, chief executive of Glasgow Chamber of Commerce, said it was “very encouraging” that firms in traditional sectors such as engineering and manufacturing were using crowdfunding.

And he suggested much of this could be down to the emergence of LendingCrowd, a Scottish platform which specialises in attracting finance from investors to provide small business loans.

On crowdfunding, Mr Patrick said: “It’s not a replacement for bank funding for everybody. For some, who have not managed to build a relationship with a bank or the offer is not for a bank, it clearly is.

“But broadly we have to recognise banking is still fundamentally the primary supplier of capital. We were interested in this because it was giving a choice for members.

“We would have expected a lot more early-stage funding [to be driven by crowdfunding] – but we are actually seeing a lot of expansion funding coming out of the report.”

The £19m raised by BrewDog, arguably the most famous Scottish company to tap into alternative finance, in its latest crowdfunding drive, was not included in last year’s tally.

FreeAgent, the Edinburgh-based software company, raised the highest amount of any Scottish company using crowdfunding last year, having generated £1.2m via an equity campaign on the Seedrs platform.

Equity campaigns are growing in number, the report found, with food and drink the most popular sector, raising £1,776,966 of the £3,948,777 total.

Meanwhile, some 842 campaigns were staged in the reward sector, which sees companies give investors perks such as products or discounts. Those campaigns, which represented 6.9 per cent of the UK total, raised £2,586,594; the average campaign value was £5,436, with the report noting that the Scottish success rate was significantly higher than the UK average.

Tim Wright, report author at crowdfunding consultancy Twintangibles, said: “The striking thing for me is to see the Scottish segment of the market grow in the way that it has, against the background of a very rapidly-expanding UK market.

“It means that Scotland has outstripped the growth rate in the UK generally, and that I thought was very striking.

“The other thing I find particularly interesting is the increased maturity in the market – the size of funds that are being raised are greater.

“The breadth of sector that is taking advantage of it now is growing. Even some of the more traditional businesses which you wouldn’t normally associate with crowdfunding like engineering are being found in this space because of the variety of different models.”