Starting a business often requires more than an idea. If you are finding it difficult to be approved for a loan, we recommend you consider funding your business through crowdfunding. There are several ways to do this that could work for you depending on the type of project you are trying to fund. One way to go is the charitable route. This allows individuals to produce a campaign that isn’t in the business model to support a person or give aid to someone or a specific cause. It could be for a teacher, someone who needs help with bills, or someone who has an illness.
A second type is one that mostly small businesses utilize. Entrepreneurs have the opportunity to list projects and find donors to help fund their ideas. Another name for this is rewards-based crowdfunding. When someone donates, they receive something in exchange for the money spent, such as a product from the firm they supported. This functions sort of like a pre-sale of a product. It is not always easy to gain a great deal of money this way, but many have reached or exceeded their funding goals. This is also a great way to determine if there is a feasible market for your product/service.
Lastly, there is the option of using equity. In this case, the business owner would sell equity in their business (interest in the firm) and receive funds from investors. Essentially, this is similar to selling stock and thus is regulated by the Securities and Exchange Commission (SEC).
Of course, there are rules to contributing and participating in crowdfunding so you must be aware of the particular requirements and benefits of the option you take. Not all businesses will benefit and there are risks you may face, such as:
- The total amount of your investment is at risk
- The rate of return received is not guaranteed
- It could be difficult to sell your stock
- It is not guaranteed that the company will reach the needed level to secure success
These are just a few of the options available to raise funds for your business. Traditional methods are still available but if you are open to the more recent platforms, this could work for you.
