All together now! Small investors flock to the idea of crowdfunding

To anyone who has ever watched the investors on Dragons' Den and thought "I could do better than that", a new type of investment could be just for you.

Dubbed crowdfunding, it allows people to group together and pool their resources to help fund a business or project, and share in the spoils of its success. The idea lets investors inject funds into new and growing businesses, without having to commit large sums of cash. And it is catching on fast in the current low-interest rate environment.

Crowdfunding is normally done via websites such as Crowdcube.com or US-based Kickstarter.com. Businesses create an online pitch with the aim of persuading micro-investors to put in money. They can spread their investment between several businesses rather than put a lump sum in just one company. They realise a return when the company is sold, and in the short term may also receive dividend payments. However, crowdfunding tends to be a long-term investment.

The advantages for businesses and entrepreneurs are clear - it's a way to raise funds at a time when banks are likely to turn them down. On Crowdcube, bodycare product company Bubble & Balm raised all of its £75,000 target while Kammerling's, which has developed a new kind of alcoholic drink, has reached its target of £180,000. However, it's wise to be a bit cautious about crowdfunding: although the level of investment is low - it can start at just £10 - the level of risk is not.

Carolyn Hazard, a director at corporate finance specialist Fisher Corporate, says: "Smaller company investments are notoriously risky, and anyone investing in this way should remember that there is no automatic way to get their money out.

"People tempted to invest in this way should remember that they will have no control over how their investment is being spent."

Here are some other ways to get a better return on your savings

Funding Circle: FundingCircle.com is an online portal where people loan directly to small businesses. Savers lend as little as £20 to lots of established and creditworthy ventures to spread their risk. The site says savers (or lenders) achieve an average growth yield of 8.4%. Loans can be sold to other investors when the saver wants access to their cash.

Thin Cats: Similar to Funding Circle, ThinCats.com facilitates lending between individuals and small businesses. The loans are secured, so less risky, but bigger. The minimum bid per person, per company is £1000 so it is aimed at more experienced investors.

Zopa: Peer-to-peer marketplace Zopa.com allows people with savings to lend money to those needing a loan, without a bank as a middleman. The saver obtains a higher interest rate than a normal savings account. The borrower gets a low-rate loan.