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The Benefits of Crowdfunding

July 18, 2013 by  
Filed under Crowd Funding, Front Page

The Benefits of Crowdfunding

By SunintheEast

False figure 8

False figure 8 (Photo credit: Wikipedia)

Crowdfunding is the new alternative to a bank loan to start a business. Due to the decline of the economy, banks are less willing to lend capital to entrepreneurs who are looking to start up a new company. Once you have been denied a bank loan you have two choices, walk away or look into an alternative. Crowdfunding matches a single entrepreneur with a group of people willing to help fund their business. The benefits also extend to those who are willing to lend the money as well as the person borrowing the funds.

Easier to Get Funding

Bank loans are time consuming and require a set idea and business plan before you are able to qualify for the loan. Currently the number of start up businesses who are denied bank loans is higher than the number that actually gets their loan. With crowdfunding, you can simply pitch your idea to a group of potential investors and see how many are willing to lend you the money you need to start your business.

Less Risk

Once you have been denied a bank loan, you may look into a payday loan. These loans are slightly risky, especially to new businesses as you are unsure of what your profits will be in the beginning. Crowdfunding is similar to online payday loans without the high interest rate. The risk is also less for those investing in your startup as the investment may be split across a number of people. Crowdfunding will also give you an idea of how well your business will do based on the opinions of those you ask to help fund you.

Market Validation

Gaining confidence in your product or concept may be difficult to do upon starting your business. New companies usually are slow to get off the ground which may discourage those interested in starting their own company. Crowdfunding allows entrepreneurs to gauge the reaction of the public to their concept or product. People are unlikely to invest in a product or idea that they would not purchase or do not believe will be successful.


When looking into crowdfunding, look for an all or nothing platform. This type of platform will allow you to set a goal and share your idea with the potential investors. If you do not raise all of the necessary funds you will receive nothing and all contributed funds will be returned to those who invested. If you reach your goal, you will receive the funds and the platform will take a small percentage for their fee. While you are attempting to reach your goal you are also getting free advertising of your product or service.


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