New to crowdfunding? What you need to know

Crowdfunding is comparatively a newer concept in the field of business and marketing. It is adopted for funding a small or start-up business so that it can expand its business territory and increase the production, without taking any bank loan. This facility of crowdfunding can be of different types, based on the return offer made by the business owner.

 Kinds of crowdfunding that the business owners can avail 

  • When the business owner appeals to the general public for financial pledges that can help in expanding his company, people donate money to support this business and it is termed as donation crowdfunding. This kindness is usually repaid in the form of freebies or heavy discounts on the products of that company.
  • The business owner may appeal to the local business community and request them to buy equity stakes from his company. This purchase money of the stakes can be used for the growth of the business and it is termed as equity crowdfunding.
  • The people may invest money for the growth of the company, with the promise of the return of that money with a certain interest in due course of time. Thus, the investors can expect some extra income from this option and this kind of funding is termed as debt crowdfunding, which is somewhat similar to the bank loan, but without the hassles of the related paperwork.

 

Different benefits of crowdfunding for the start-up businesses 

  • The crowdfunding allows the businessman to get the required money for business expansion without facing the lengthy procedures of paperwork needed in the banks or financial organization for granting the business loan. Thus, much time and energy can be saved for the business owner.
  • The brand name of the start-up company can be effectively spread among the potential customers, as they are asked for the donation pledges for the company’s betterment. People feel more emotionally involved with this company and the money donors contribute in the further growth of the company, by buying its products.
  • The company can save a large amount of money that would be spent on marketing of the brand name and its products. The business owner can enjoy the benefit of free marketing of his business through the social media sites, as a large number of people post about their funding this company.
  • The owner of a start-up business does not feel alone due to the inclusion of many other shareholders in his company. Thus, he can expect further financial backing for his organization in future as well.

 But the company owner should be careful to follow all the legal procedures for crowdfunding. He can choose any method of crowdfunding as per the nature of his business and the condition of the market.

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