Crowdfunding for Businesses: Things that You Need to Know
  • 28/07/2019
  • By Kelly Wilson
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Crowdfunding for Businesses: Things that You Need to Know

Creating fundraising campaigns on the crowdfunding platforms can assist you to get financing as well as spread the word about the business. Crowdfunding has been helping each and every business to tap into the internet’s unending power for raising money for the business. It provides the owners of businesses with an inexpensive route to bankroll the fledgling business ideas. It also helps in promoting the services and products of the companies over the social media accounts, and also builds an appropriate base of enthusiastic customers.

Setting up the crowdfunding campaigns is simple. You have to make use of the crowdfunding campaign for creating a profile for the business, services, or projects. You have the option of setting funding goals and publishing the request online. People who are interested have the option of giving donations to the cause, in exchange for any company asset, either in the rewards form or equity form.

Different kinds of crowdfunding

You need to have adequate knowledge about the two kinds of crowdfunding. The two kinds of crowdfunding for the owners of small businesses include rewards-based crowdfunding and equity-based crowdfunding. Ensure that you are educating yourself about both these options and understand, which one is going to be appropriate for the requirements that you have.

Rewards-based crowdfunding

In the kind of crowdfunding that is reward-based, the donors are responsible for receiving services and products, which are related to the business projects. The value is completely dependent on the total amount that has been donated. For example, the donation of five dollars can be rewarded with handwritten thank you cards, while 50-100 dollars is capable of bringing early access to the product or service of the company.

Reward-based crowdfunding campaigns are ideal for the owners of small businesses, who are looking forward to getting the business going, without getting weighed down by the loan payments.

Equity-based crowdfunding

In the equity-based crowdfunding, donors are going to receive the shares within a company. The number is completely dependent on the total contribution amount. The contributors normally choose to invest in companies, which they believe, are going to gain success in the near future. The reason behind this is that the company’s success is responsible for influencing the return of the investments of the donors.

This crowdfunding method is definitely an ideal idea for small businesses that have solid plans for growth. You are going to be left with the investors within the company, which is going to result in the potential hiccups, thereby increasing the scrutiny from the regulators.

How can you ensure successful crowdfunding?

Given below is a list of the ways in which you can ensure the success of your crowdfunding campaign.

Your business should be capable of being unique and standing out from the entire crowd: The successful campaign of crowdfunding often relies on the ability to capture the interest of the potential investors. This means that a unique product exists, which helps in filling the void of the consumer and a business story, which is going to attract the investors to provide you with a chance.

Investors value the rewards: You should ensure that the offer that you are providing to the investors is capable of capturing their interest.

Your network is wide: Having numerous friends and family to not only support but also promote the business course is responsible for amplifying the efforts of fundraising. Without the help of strong promotional bases, it is almost impossible to reach the financial goals.

Other options that you can consider

There are times when crowdfunding is going to work for securing the finances of your startup business or generate a buzz regarding your product. However, it is not going to be a solution for the long term financing of your business. In this case, you have to consider the other ways with the help of which you can fund the business. Given below is a list of the options that you can consider.

Banks and credit unions

For the small business financing, you can opt for traditional lenders like the credit unions and banks. Loans from the credit unions and banks require proper credit scores and also come along with a certain rate of interest. However, creating a strong relationship with the local bank is going to be extremely beneficial especially if you need any financing help in the future.

Online lenders

If you do not qualify for the bank loans, you also have the option of considering the alternative lenders, who do not have stringent requirements of qualifications. However, you need to know that the borrowing cost can be especially high.

The business credit card

Business credit cards are capable of providing access to revolving lines of credits that can be used for both the current as well as the future expenses of your business. It also helps in building the business credit, thereby making you appealing to future lenders.

If you feel that you are drowning in business debt, it is a good idea to settle your debts so that you can carry on smoothly with the various business aspects. You can go through the debt settlement reviews on the various reputed websites.

The benefits of crowdfunding

If you are the owner of a small business, a crowdfunding campaign is going to help you in two ways. You are either going to find financing for the business or word will start spreading about the products and services that you are offering. Crowdfunding is more like a grant as opposed to a loan because you do not need to pay back your funds or remain anxious about the rates of interest.

It has been observed that the female entrepreneurs have a lot of success with the different platforms of crowdfunding as opposed to their male counterparts. As stated by www.nerdwallet.com, women from different parts of the world have the capability of reaching 32% more financing goals by using crowdfunding.

Conclusion

On basis of your business requirements, it is a good idea to opt for crowdfunding. However, it is important that you know about the two types of crowdfunding before you delve deeper into it.

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