4 Great Benefits of Crowdfunding for Small Businesses

Crowdfunding is one of the concepts that marked the 21st century. In 2009, the arrival of Kickstarter marked the beginning of a new approach to investment. You no longer have to impress a board of investors now; you can present your ideas to the public and let them decide whether they want you to go through with your project. Crowdfunding has opened many doors for everyone and, over the past 5 years, we have seen many great ideas come to life that otherwise wouldn’t be possible. So, let’s see what some of the more concrete benefits of crowdfunding are and how it has changed the world for the better.

More capital acquisition options

Like it was said, crowdfunding opens up new sources for accreditation. Before, you couldn’t find funds to start your own line of work unless you managed to pitch your idea to the board of investors. You only had a limited number of people that you could impress, which was a bit unfair, since you would get judged before people even had the chance to see your project.

Now you can raise the money you need from a lot of people – basically, anyone who believes in your vision can become an investor, which is great. Also, if only a small number of people agrees with you, it’s a clear sign to back off and salvage what you can, without risking any more time, money and effort.   

Better insight into what one is funding

This is another great perk that makes the investment process far safer. When it comes to crowdfunding, people really try to impress the public, so the whole project and progression is far more transparent. It’s in everyone’s best interest to put their cards on the table. As an investor, you feel more secure, and as someone who is being funded, you feel more inspired to show your progress and get more funds, and at the same time, not to let everyone down, since more people believe in you.  

It’s easier to become an investor

There are many benefits for investors here, since there are three types of crowdfunding. The first one is donation, where you donate because you believe in a good cause, so even though you are not financially compensated, the success of the project will reflect positively on your moral values and psyche.

The second type is Debt Crowdfunding, which is basically peer-to-peer lending. Once the project is finished and starts to generate income, you get your money back with interest that you and your peer have agreed upon.

The third type is equity crowdfunding, meaning that, as an investor, you are entitled to project shares so, if your investment becomes a huge success, you can benefit a lot more than in the previous case, since your return corresponds to the value of the shares. However, if the project does not achieve the desired results you end up losing your investment.  

Since becoming an investor is quite easy via crowdfunding, the whole idea could be a bit too alluring. People who never made investments before are usually encouraged and feel overconfident. In order to mitigate those risks, you should educate yourself. For example, it can be a bit tricky when you enter the field of international investing, so it is imperative that you remain vigilant. Just make sure that you know all of the ins and outs of the field, before you decide where you are going to invest your funds.       

Lower risks

As you can see, crowdfunding may pose a bit of a risk for inexperienced investors, but the overall concept is leaning towards a high-risk-free solution. Since you receive funds from multiple investors, if something goes south, people do not lose a substantial amount of money. Also, with greater transparency, everyone has better risk assessment. So, all things considered, this is a better option for everyone.  

Since it has such a great popularity, people expect to see a rise in crowdfunding platforms. This alone opens up more job opportunities and more places where people can have reliable investment options. So, if you are someone with vision or someone who wants to support good ideas, this is the perfect time to be alive.