Small Talk: Why Aim should aim to raise its standards and lose that Wild West image with wary investors

Critics of the Alternative Investment Market like to portray London's junior stock exchange as the Wild West of capital markets, warning that its light touch regulation is far too open to abuse. These accusations are often overblown, but with Aim now finally turning a corner after years of difficult trading, it can't afford any suggestion it is an easy place to hide bad apples.

One reason why Aim has often underperformed in recent years is that investors have had serious trust issues – hardly helped by a series of scandals that the rules seemed to allow. When investors are risk-averse, the last place they put their money is in markets they don't feel they can trust.

However, many of the worst abuses have been tackled. And Aim genuinely does finally seem to be emerging from the doldrums.

There are several reasons to be optimistic. Listings are on the increase – more companies joined Aim during the third quarter of the year than left the market, the first time that has happened over a three-month period since 2007. Returns are increasing – the FTSE Aim 100 Index is up almost 14 per cent this year following a difficult 2011 and 2012. And the market is getting more support – notably the Government's announcement earlier this year that it will allow investors to hold Aim-listed stocks in tax-free individual savings accounts.

Against this backdrop, it is worth noting the re-emergence of concerns about governance standards on Aim – and heading off any problems before it is too late.

For example, research published today by the executive search firm Edward Drummond shows 34 per cent of the 100 largest companies on Aim have fewer than three non-executive directors on their audit companies, the minimum recommended.

While Aim companies are not bound by these corporate governance codes, it seems sensible for them to seek to comply where possible – particularly in an area as crucial as the audit committee, whose roles include safeguarding the company's financial integrity and the prevention of fraud.

A new report from the Financial Reporting Council also ought to ring alarm bells, as it is now conducting a formal review of the reporting standards of small companies.

The corporate governance watchdog points out rather archly that it has been commenting on the "the poorer quality of reports and accounts produced by some smaller listed and Aim-quoted companies for a number of years" and now appears to be threatening to do something about it.

For now, these are just straws in the wind, but it would be a great shame if question marks over governance and regulation on Aim were to threaten to derail its recovery in any way.

It is a difficult balance to strike, and it would be a mistake to stifle the market with unnecessary strictures. But there is a case for higher standards – particularly if more retail investors are enticed into Aim by the Isa concession.

Pizza venture gets slice of crowdfund cash

More success for the burgeoning crowdfunding sector: Pizza Rossa, a new chain of takeaway pizzerias, has just raised £440,000 of equity funding from more than 120 investors via the Crowdcube platform – the largest amount of equity ever raised in this way by a start-up business in the UK.

Pizza Rossa will use the cash to fund the opening of a production facility plus its first two pizzerias, though it has plans for 12 openings over the next five years.

The success will encourage City fund manager Nicola Horlick, who this week launched an appeal for £150,000 of equity funding for a new restaurant venture she is planning in West London. Ms Horlick hopes investors on Seedrs will fund her purchase and expansion of the Times Place Brasserie in Chiswick.

The venture is Ms Horlick's second experience of crowdfunding – earlier this year she raised £150,000 in less than a day for her film finance company Glentham Capital. And to sweeten the deal on her latest venture, she's offering investors in Times Place a permanent 20 per cent discount off the cost of meals there.

Start Up Loans well on the way to target

James Caan's role as the Government's social-mobility tsar may have been controversial, but the Start Up Loans Company he runs on behalf of ministers appears to be performing well.

It has just announced loan number 10,000, bringing the total amount lent through the scheme to almost £51m. That's a third of a way towards the £151m it has promised to lend to 30,000 new businesses by 2015.

Set up in 2012, the Start Up Loans Company offers taxpayer-funded sums of up to £25,000 to the founders of new businesses (defined as those yet to launch or those that have been up and running for less than 12 months). The loans carry an interest rate of 6 per cent and are open to anyone over the age of 18.

Ministers said this week that from next year, the scheme, which also offers a range of mentoring services and business advice, would target groups where the Government is particularly keen to encourage greater entrepreneurialism, including new mothers, the over-50s and people not in employment, education or training.

Small Business Person of the Week: Simon Dixon, Chief executive, Bank to the Future

"We are a crowdfunding business that puts investors together with businesses looking for equity funding, and at the moment we're in the middle of trying to raise £2m for ourselves on the site, which would be the largest amount ever raised in this way for a British company.

"I believe crowdfunding has a huge future – we've already raised £400,000 for nine businesses, but this is a sector still in its infancy.

"The industry body, Nesta, reckons crowdfunding could be raising as much as £15bn a year within three years and the day will come where it replaces a large proportion of the £115bn financial-services industry.

"Our business is a little different to others. Most businesses on our site offer investors a choice about the support they can offer – as well as selling equity, they also put up rewards and perks that investors can opt for instead. We find it's a pretty equal split between the two routes.

"The other thing we do is incubate all businesses before they post their pitch on the site, working with them to develop an offer that stands the best chance of success, as well as conducting checks on them.

"When you add transparency to the model of raising finance, take out the institution in the middle and leave it to the people to decide which businesses get funding, you really begin to change the financial system."