Crowdfunding can be a powerful fundraising tool for personal projects, startups and small businesses who need some financing help. It allows people to seek funds online as a loan for their company that they will pay back with interest over time. People may choose to invest in certain crowdfunds to make a profit while supporting a small business.
One of the reasons businesses choose crowdfunding as a way to obtain loans is that they are often more flexible than bank loans. Getting a loan from a bank can be more complex with a long application process and stricter rules about what the funds can be used for. With crowdfunding it can be easier to apply depending on the website used and businesses have more freedom with their funds.
There are two main types of crowdfunding known as reward crowdfunding and equity crowdfunding. Reward crowdfunding is a way to provide incentives for people to donate their money online such as VIP access, discounts, new versions of products or other rewards. Equity crowdfunding allows investors to provide money in exchange for shares in the company.
The most popular websites used for crowdfunding include Kickstarter which was one of the first reward crowdfunding platforms and is a great option for funding creative projects like films, video games or recording. Another commonly used crowdfunding site is GoFundMe which is one of the largest fundraising platforms with a community of over 50 million donors. These kinds of sites tend to charge processing fees and 5 percent of all funds raised to use their platform.
If you are considering using a crowdfunding platform for your small business it is important to keep in mind that you will need to a marketing plan in place in order to achieve your goal. Overall, crowdfunding can be a useful choice for businesses who need new resources for financial support.
Matt Ramage is founder of Emarketed a web marketing agency located in Los Angeles. He loves coffee, good design, and helping businesses improve their look and getting found on the Internet.