Have a revolutionary business idea on your mind but don’t have the venture capital to bring your idea to life? Crowdfunding can be beneficial in such cases. It is an effective way to raise funds for a small business. A budding entrepreneur or a small business owner registers on a crowdfunding platform and start a campaign to find potential investors to cash their business. Now the thought may arise in your mind regarding the effectiveness of crowdfunding. In this article will discuss in detail whether crowdfunding is an effective solution to meet your financial needs.
Crowd Funding For Small Business – Is It Beneficial?
In earlier days the business loans came from limited sources like banks, credit unions and financial institutions. But in this tech-savvy era, internet holds a lot of power and there are many diverse ways of accessing funds. With the emergence of many online financing methods, obtaining a loan nowadays has become much easier.
Crowdfunding too taps into the powers of internet to raise money for business owners. All you have to do is sign up on a crowdfunding platform, set campaign goal, offer some rewards and start your campaign. If your idea is deemed promising and profitable in the future you will find many potential crowdfunding backers to fund your project. You can also look up the backers too. Nowadays many internet databases provide backers email list to help you find potential investors. You can also take the help of social media platforms like Twitter and Facebook etc to reach a more vast potential audience.
Many startup businesses fail in the initial stages due to the lack of funding. Crowdfunding can be especially beneficial for small busi-nesses, as you not only get the capital that you need to get your business running, you also get the word out regarding your product and services. You get your finances arranged and your product gets the advertisement it needs.
Another benefit of crowd funding is that while burrowing the money through public funding, you don’t have to worry about the time window within which you have to return your money. You present your ideas and if they are deemed worthy backers will invest in it. There are no time stamps or interest rates that you have to think about. You can either design a reward plan for the backers or go for equity crowdfunding by sharing of company assets.
With crowdfunding you don’t depend on a single source to secure your funds rather your campaign aggregates smaller amounts from many different people or groups of people. You can start off with very little money of your own and gather the rest of it through donations made by people on your campaign.
Also unlike business loans there is no eligibility criteria for crowdfunding. Any individual with great ideas can start a campaign. All that is necessary is a good business plan and strategy and you are good to go.
But unlike any marketing campaign, crowdfunding too has its downside. The money that comes to you is actually provided by the crowdfunding platforms although it is collected from multiple indi-viduals. It is imperative that you meet your campaign goal otherwise not a single dime reaches your pocket. So setting the goal for a crowdfunding campaign may be slightly risky considering the possi-bility of failure. You have choose a goal such that your financial needs are met and the campaign too is successful.
To sum it up, going by the pros and cons of crowdfunding it seems like a beneficial alternative for budding businesses. Compared to business loans crowdfunding gathers money more easily and cuts you the slack of timely repayment and high interest rates.