Guest Post: Using Crowdfunding as a Source of Finance
It can be very difficult for individuals setting up a new business to settle on the right type of finance they need. There are various types of finance options available, and any alternative finance that is invested in to should be thoroughly researched to ensure it is the best option for its intended purpose. When performing research in to the finance options available to them, business owners should also look for loans that can be tailored to their individual needs and circumstances. Paying back any form of loan can often take between as little as 6 months to as long as 5 years, and ensuring the terms of this repayment are flexible can ensure a business never slips into negative equity.
Many people assume that loans and various forms of bank lending are the only forms of secure finance available, however, crowdfunding can provide access to necessary capital. Unlike a traditional loan, crowdfunding is a source of finance that hasn’t come from one specific source and can be used to help an individual or entity. Businesses will commonly need to be trading for at least two years before this source of finance can be tapped in to, but it is a wide spread and increasingly popular way to fund business ventures.
The group of people providing crowdfunding finance will commonly do so in exchange for certain rewards or recognition. Any benefits given to crowdfunding financers will need to be written in to a signed contract to avoid any later discrepancies, as well as any negative representation of the company in question.
There are several benefits of using crowdfunding as a source of finance and these include;
- Access to Capital
Thinking outside of your immediate network of finance options and gaining capital through crowdfunding is a great way to acquire capital, without accumulating debt, or giving up equity.
- Decreases Risk
Although many expenses can be forecast in business development, there are several challenges in the market that can affect outgoing expenditure. Many individuals are willing to invest in a business they believe in order to gain some form of return. Crowdfunding can hedge risk, and provide a sufficient source of funding.
Author: Karen James has a passion for business, travel and creative endeavours and enjoys sharing her experiences with a wider audience. When she isn’t writing she enjoys long walks with her chocolate lab Coco and spending time with her family.