Crowdfunding as an Alternative Funding Source for Small Businesses

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In recent years, crowdfunding has become a viable source of business finance for all companies. But for small businesses in particular, creative use of social media via the internet means it is possible to obtain financing from a large number of investors who may typically contribute anything from a small amount to larger figures. However, due to the sheer numbers of people who use the internet this can mount up to substantial amounts where a crowdfunding campaign is successful.

Game Changer

For many small businesses, by utilising the advantages that technology can open up between companies seeking capital and investors who want to see growth, crowdfunding can be a game changer. In traditional business models it was often tough for small businesses and entrepreneurs to gain access to enough interested investors who had the cash to put into the business. However, through the smart use of social media this has given greater visibility and access to a wide range of people across the globe who may be predisposed to invest.

Crowdfunding Platforms

Although it is, in principle, possible to provide crowdfunding from your own website the more usual way of doing this is to use the skills and expertise of a specialist finance company or established online crowdfunding platform. When crowdfunding is undertaken using this method the platform provider will establish the criteria for the businesses and projects that are able to request financing. With the skills of a reputable platform provider you will be guided in how to utilise this modern method of alternative finance.

Structured Tracking

Not only can a small business or entrepreneur use crowdfunding to attract investors, but the model provides a perfect way of tracking investments. This structure enables them to also access tax schemes such as Enterprise Investment Schemes and Seed Enterprise Investment Schemes that can offer tax incentives that will make investing in smaller businesses and start-ups much more attractive to investors.

Private Investors

Once you have started to attract investors, the beauty of this kind of business finance model is that interested parties can invest as little as they want – such as £10 – up to much bigger figures. Through the power of social media your business will be reaching a far wider audience than could ever be attained through previous methods of business promotion.

How to Prepare for Crowdfunding

As with other business goals and objectives, it is important to have a clear idea about the company’s plans and goals and why you are raising the money. With this kind of campaigns it is imperative that investors have a clear idea about how their cash will be spent and a convincing projection of future aims and growth. Crowdfunding campaigns typically last between 30 to 60 days, but if you use a platform it can take a few months to go through the company processes and prepare your pitch so this needs to be factored into the planning stages.

Unprecedented Growth

Crowdfunding for business growth has been unprecedented in recent years, and a well thought out campaign can make all the difference for companies of all sizes in the bid to grow the business and attract a diverse range of investors. By using a platform provider you can avail yourself of their knowledge and tools to get the best from your campaign, and commission is usually charged subject to how successful the campaign has been. So for entrepreneurs and small businesses who want to get on to a firmer footing and move their company to a more stable plateau, crowdfunding can be a lifesaver.