Crowdfunding For Entrepreneurs

By Debbie Gregory.

Crowdfunding enables entrepreneurs to tap into the power of the Internet to raise money for their small businesses. It provides business owners a relatively inexpensive way to bankroll a young business or new product idea.  Additionally, Crowdfunding helps promote businesses and products on social media while building a base of enthusiastic customers.

Crowdfunding is when a “crowd” funds a project as opposed to having one or two major investors. Having a unique product that fills a consumer void and a strong personal or business story that compels investors to provide funding to have an opportunity for success.

Crowding works with the company selecting a crowdfunding platform, and backers pledging an amount to the fund, usually in return for a reward for their contribution. Donors receive a product or service related to the project, with the value depending on the amount donated. For instance, a $5 donation might be rewarded with a handwritten thank you card, while $50 or $100 might bring early access to the company’s product or service.

Many crowdfunding websites exist, each with its own fees and rules for use.   The top five Crowdfunding websites are Kickstarter, GoFundMe, LendingClub, Indiegogo and Prosper.

  • Kickstarter – is one of the best-known crowdfunding resources with a proven history. It is best for businesses focused on making products for consumers such as games, art, technology, music, and food. Products that are able to be shipped to campaign backers.
  • GoFundMe – doesn’t charge any fees other than the transaction fees when the funds are received. It can be challenging to get your campaign attention.
  • LendingClub – works for businesses that need quick capital and can qualify and is a fantastic debt crowdfunding option. Businesses must have been up and running for at least 12 months, have good personal credit score of at least 700 or more, with a minimum of $50,000 in annual sales.
  • Indiegogo – works best for businesses that are making consumer products that can be shipped as rewards. Companies at any stage are welcome, but most Indiegogo backers want to see that prototypes available.
  • Prosper – is best for business owners who desire a personal loan that can be used for business purposes. This is an excellent option for a startup or when a business isn’t generating enough revenue to qualify for other financing options. Keep in mind that it can place personal assets at risk.

Every crowdfunding site offers small businesses something different, with options from bigger sites that provide more exposure but a lot of competition to niche sites that have dedicated followers.

Veteran and Military Business Owners Association, VAMBOA,