This is a really good idea

[doodab]

So why make it a lottery? Why not just encourage people to invest: you put in a pound, and if the company doesn't default on the loan, you get your pound back.

And if it defaults, you don't. Bit of a lottery really. Without the prize.

Yes, because as above, people are suckered into doing it because they think they have a chance of winning the jackpot. No investor would put money into a company based on lottery like odds of seeing a return, and no investor would lend to a company on an interest free basis. This only works because the poor and stupid are making up the shortfall.

Who says they are suckered into it? There is a pay off the same as any other investment. Lots of investors put money into companies based on lottery like odds of seeing a return, and lots of people (friends, family, founders) lend to startups interest free, or even give people money to start a business.

[VectraMan]

There is a pay off the same as any other investment. Lots of investors put money into companies based on lottery like odds of seeing a return

You'd really invest if the chances of getting any money back was 5000:1? You wouldn't have money to invest for long.

and lots of people (friends, family, founders) lend to startups interest free, or even give people money to start a business.

And they're probably suckers for a different reason.

[doodab]

You'd really invest if the chances of getting any money back was 5000:1? You wouldn't have money to invest for long.

It depends on the pay off. If I could make 10,000 investments with a 5000:1 chance of paying out £10,000 then I would. That's more or less what VCs do, they know that the vast majority of companies they invest in will come to nothing, but 1 in 100 that pay off will more than compensate. It's like the concept of "pot odds" in poker. You don't expect to win them all, you play the numbers so you win on average.

These people also enjoy the benefits of living in a healthier local economy with lower unemployment. I'd say that's a sensible investment myself.

[SpontaneousOrder]

Dumb scheme. Viable businesses don't need charity. Charity, in this context, is much more likely to misallocate scarce resources which would be better allocated somewhere else.

[doodab]

Dumb scheme. Viable businesses don't need charity. Charity, in this context, is much more likely to misallocate scarce resources which would be better allocated somewhere else.

Where does this belief that a "viable business" will automatically make money from day 1 come from?

Amazon, eBay, google, apple all needed "charity" as you put it at some point.

[d000hg]

Dumb scheme. Viable businesses don't need charity.

Many, many very successful businesses only exist thanks to investment by friends and families, or from Angel investors who are the next thing to charity.

[DaveB]

Except at its heart it's gambling; it's still exploiting the weak and stupid as a way of raising money. The money might go towards good things, but then is propping up businesses and jobs that much more deserving than the "good causes" the national lottery raises money for?

It certainly has a much more direct impact on the local community than the National lottery is likely to. It's creating an on going investment fund for local business, creating jobs and supporting the local economy. Charity begins at home and all that.