The bands have become so popular they have apparently made their Malaysia-born inventor Cheong Choon Ng £80 million in just three years.
The former Nissan engineer Cheong, who now lives in the U.S., came up with the idea for the bands back in 2010 when he came home from work to find his children using rubber bands to make crude jewellery.
He added: "So I sat down with them and said, ‘let me show you how to do it the right way’. I found the rubber bands were falling apart and I couldn’t hold them together and I thought ‘jeez there must be an easier way’."
They became impressed when he managed to use multiple boards and create diamond patterns using the bands.
Originally called Twistz Bandz, Cheong changed the name of his creation to Rainbow Loom after learning another company had a similar name.
After suffering some initial setbacks, business really picked up when Learning Express Toys made an order of 24 looms which subsequently sold out in two days.
Parents were also fans as children played with the bands together, helping each other out and following instructions.
Children then began sharing tips and their creations on YouTube, providing free viral marketing for Rainbow Loom.
They currently dominate the most popular toys and games section on Amazon.
As well as jewellery, people are creating and selling some rather bizarre creations.
Despite the sensational success of his business, Cheong claims he hasn't allowed it to change his life.
"It's a nice house, why should we move? We're not over-the-top people. Maybe when I retire I'll buy a boat and go fishing," he is quoted by the Mirror as saying.
Having been a huge success in the U.S., the 20p bands have now exploded in Britain since the start of the year.
The Duke and Duchess of Cambridge have now been pictured wearing them, as has One Direction heartthrob Harry Styles.
Earlier this year Jimmy Kimmel's viewers helped him create a "loom suit".
And Ellen DeGeneres even provided him with loom pants to go with it.
Cheong has said new loom products are in the pipeline.