Can Crowdfunding Work for Your Small Business?

Can Crowdfunding Work for Your Small Business?

  • July 5, 2019
  • By Aidan Dwyer

Financing your small business can be a tricky ordeal, especially in the early growth stages. There are many options out there to try and raise the funding you need. From bank loans to angel investors to fast working capital, the possibilities are endless.

One option that has become popular as of recently is crowd-sourcing. Crowd-sourcing is a method of collecting money that involves getting small donations from a large number of people. Crowd-sourcing has become wildly popular for startups. Particularly, the tech industry for startups that provide people with a product or service that is new, innovative, and in demand. Companies looking to crowdfund use social media to their advantage to help spread the message and gain donations from a broader range of investors. The use of popular crowdfunding apps such as Kickstarter has led to the funding of thousands of small businesses, nonprofits, and other miscellaneous projects. These requests for capital are often accompanied by promotional offers to encourage donations. Crowdfunding also acts as a de-facto marketing campaign. It allows businesses to gain an early following before their product or service is even launched.

In order to start a crowdfunding campaign, there are a couple of things you need to accomplish. You must figure out your funding goal or amount, choose a crowdfunding platform and set up your crowdfunding campaign. But the question still remains, will crowdfunding work for your business?

Will Crowdfunding Work for Your Business?

This is not a question that can be easily answered. Crowdfunding works for different businesses in different ways. As stated before, crowdfunding has been a wildly popular way for businesses with high demand to gain funding, such as companies in the tech industry. It is also a popular way for nonprofit organizations to raise money for services and causes. But will this work for Joe’s Pizza or Andy’s Construction company? The answer is most likely no.

In order for crowdfunding to work, you need to have a massive amount of people who want to donate. This works for innovative companies and NPOs who will be able to captivate hundreds of thousands of people with their causes or innovative products/ services. But for small businesses that will not reach an extremely large customer base, crowdfunding will not work. It is because the crowdfunding campaign will not reach enough people to generate considerable funding.

Other Business Funding Options

For a small or medium-sized business, you will be better off looking into a more traditional source of funding. Bank loans and angel investors are viable options for financing.  However, gaining funds from banks or venture capitalists can be a long and grueling process that may not work out in your business’ favor.

Another option is working with alternative lenders. These lenders work quickly to provide financing that can suit your business’ specific needs. A simple Merchant Cash Advance, Term Loan or Line of Credit will suffice to cover your business’ need for working capital. If you would like to find out more about what types of financing options are available for your small business, fill out our commitment free application here.

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