Successfully running a business requires cash flow. Having enough cash to pay upcoming expenses is critical to maintain operations. Whether you are just starting your company, or have been in existence for some time, we recommend you consider raising capital through crowd-funding if you are finding it difficult to be approved for a loan.
One type of campaign is rewards-based crowd-funding. Entrepreneurs have the opportunity to list projects and find donors who want to support their concept. When someone donates, they receive something in exchange for their money spent, such as a product from the business. This functions sort of like a pre-sale of a product. It is not always easy to gain a great deal of money this way, but many have reached or exceeded their funding goals. This is also a great way to determine if there is a feasible market for your product/service.
A second option is there is equity crowd-funding. In this case, the owner would sell equity in their business (interest in the firm) and receive funds from investors. Essentially, this is similar to selling stock and thus is regulated by the Securities and Exchange Commission (SEC).
Of course, there are rules to contributing and participating in crowd-funding so it is important you are aware of the particular requirements and benefits of the option you take. Not all businesses will benefit and there are risks you may face, such as:
- Total amount of your investment is at risk
- Rate of return received is not guaranteed
- It could be difficult to sell your stock
- It is not guaranteed that the company will reach the needed level to secure success
These are just a few of the options available to raise funds for your business. Traditional methods are still available but if you are open to the more recent platforms, this could work for you.