By Debbie Gregory.

If you need to raise money for your small business, there are several viable options available that are not your traditional bank loans.  One good one is Crowdfunding.    Crowdfunding easily allows a diverse set of people to invest in your business, idea, or project.

The Internet has many Crowdfunding sites and it can be confusing and challenging to find the right one to fit your needs.  VAMBOA staff has researched some of the best crowdfunding sites in 2020 and they are below in alphabetical order:

Chuffed 

This platform is exclusively for non-profit or cause-based organizations and is focused at funding projects that help animals, the environment, or your community. This platform has funded approximately 8,000 campaigns which have collectively raised over $18 million dollars.

Crowd Supply 

This platform’s mission is to “bring original, useful, respectful hardware to life.” So far over 70% of all projects on their site have been successfully funded and twice more than Kickstarter. Regardless of what business you are in, or what project you wish to bring to life, from a simple family recipe to a complicated electronic device, Crowd Supply can assist you in making your dream into a reality.

Crowdfunder 

This platform offers equity crowdfunding that translates into selling shares of your company to accredited investors. Currently they boast a community of over 200,000 entrepreneurs and investors.   They have raised over $150 million dollars in capital to help any business from startups to Pre-Seed to Series A companies.

Experiment 

This platform’s goal is funding scientific discoveries that “push the boundaries of knowledge.” The main focus is to help scientists move away from university grants that have a high overhead cost of as much as 50 percent to 60 percent.

Fundable 

This platform offers two different programs. One option is for consumer businesses helps them raise capital for products, pre-orders, or selling merchandise. There is a $50,000 capital limit. The other is an equity program for products, services, or B2B business. This option allows the company to raise a huge range of from $50,000 to $10 million dollars.

Fundly 

This platform allows you to “raise money for anything” with zero raise requirements and zero startup fees involved. They will fund any project from personal health needs, to politics, and even vacations.

GoFundMe

This platform is for raising money for a cause including a person, a group, or nonprofit.

Kickstarter 

This platform is perhaps one of the most widely known crowdfunding sites today.  You can raise money for anything you wish. The only stipulation is that you must meet your funding goal within the allotted timeframe. Otherwise the project is not funded, and the backers receive their funds back.  To date, they have helped well over 15 million people raise over $3.7 billion to successfully fund more than 143,000 projects.

Indiegogo 

This platform offers both live crowdfunding campaigns and a full marketplace for innovative products. They are the sister platform to the popular GoFundMe platform. With Indiegogo, you can also choose whether your backers receive equity, securities, revenue sharing, or even cryptocurrency. To date, they have helped entrepreneurs raise over $1 billion dollars to fund more than 650,000 projects.

LendingClub 

This platform will connect a borrower with an investor for a personal loan of up to $40,000 dollars or business loans up $300,000 dollars. This one is really recommended for large, one-time expenses. The investor purchases a note that corresponds to a fraction of the loan in exchange for a solid return.

Patreon  (not to be mistaken with my favorite tequila, Patron)

This platform helps artists, musicians, writers, and other creative types obtain funds by running a membership business for their fans. The revenue comes from the fans paying a subscription fee in exchange for exclusive experiences and behind the scenes content.

WeFunder 

This platform focused on any small business, from a small restaurant to tech startups. They currently have over 150,000 investors and campaigns can raise anywhere from $50,000 to $50 million dollars.

SeedInvest 

This platform is focused on high-growth, professional and early-stage companies to raise either preferred equity or convertible note funding.

Keep in mind that each of these platforms has a different pricing structure and different fees.   VAMBOA is not endorsing any of these Crowdfunding sites but providing information.  We encourage our audience to refer to please each platform’s site for more information on what they charge to raise capital for your business or idea.

If you are not already a VAMBOA member, please consider joining.  There are not any fees or dues.    We will also provide you our seal to feature on your web site and collateral.  Here is a link to join:   https://vamboa.org/contact-us/

By Debbie Gregory.

To overcome the economic impact of the COVID-19 pandemic, many small businesses are being forced to seek external funding through alternative funding sources, government grants, and loans from traditional banking institutions.

You may whether small businesses normally applied for loans or is this a new behavior in response to the pandemic?

Earlier this year, Small Biz Ahead surveyed small business owners across the country to learn exactly how the pandemic was affecting their use of both traditional and alternative funding. Here is what the survey found:

Starting a New Business:

Prior to the pandemic, most small business owners were hesitant to use external funding sources.

• Less than 1% used a federal or state grant to start their business.
• 60% of all small business owners used their own personal savings to start or run their businesses.

Running an Established Business:

• 85% of small businesses sought zero external funding in the last three years.
• 28% of small business owners use their personal credit cards to pay for business expenses.
• If the business did need money, they were more likely to seek out traditional funding sources as 41% stated they would go to their main bank first.
• 25% stated that they would simply use credit cards or existing funds.

Does age affect the business owner’s thoughts on external financing?

They found that younger generations tend to be more open to applying for financing or loans though they are still a bit hesitant. However, they do typically turn to friends and family for loans first. The study found that about a third of small business owners between the ages of 18-34 currently use friends and family as their main source to finance their business. This drops dramatically for generations older than 34, just over 10% of 35-44 year olds and less than 2% of 45-54 year olds stated that they seek out loans from friends or family.

What do small business owners look for when selecting a financial provider?

The small business owners surveyed:

• 38% stated that interest rates are the most important factor in choosing where to obtain funding.
• 38% stated that the terms and conditions were the most important factor.
• 34% prefer a financial provider who they know and have a relationship.

Does gender affect where the business owner will look for financing?

The study found that men (38%) are much more likely to view an existing relationships as the most important factor when selecting a financial provider, whereas women (41%) typically go out of their way to look for less expensive funding and lower interest rates.

How Does Age Impact Funding Choices?

There was also a clear divide between the age groups:

• The 18-34 age group favored institutions that offered easy applications,
• The 35-64 age group favored institutions with less expensive loans and more competitive rates
• The 65 and over age group favored institutions that they had a prior financial relationship.

What about alternative funding (such as crowdfunding or peer-to-peer)?

According to the study, alternative financing is not used very often by small business owners in the USA:

• 2% of small businesses have used equity financing.
• 4% have used P2P (peer-to-peer) lending.

However, this is changing. Many small business owners (42%) stated that they were open to the possibility of using alternative financing in the future should the need arise. The 18-34 age group were the most comfortable with alternative financing options:

• More than 10% stated that they have used P2P lending.
• A bit over 5% stated that they have used crowdfunding.
• All in this group stated that they would consider using alternatives to traditional finance in the future.

VAMBOA, the Veterans and Military Small Business Owners Association wants to learn your opinions on financing and small business funding.  Have you needed to turn to external financing to survive the pandemic?   Please let us know by emailing us:

info@vamboa.org

If you are not yet a member of VAMBOA, we invite you to join.  There are not any fees or dues and you may use our seal on your collateral and website.   Below is a link to register to become a VAMBOA member:

https://vamboa.org/member-registration

By Debbie Gregory.

The COVID-19 pandemic has continued to financially impact small businesses negatively.  Consider a crowdsourcing campaign might help your business to stay afloat and prosper.

Nearly every small business across America has been impacted by the coronavirus pandemic.   Some have had to their operations or shut down completely. The financial impact of state lockdowns and social distancing has been a very challenging burden for many business owners, especially those who can no longer afford to pay their employees and bills.  Even with government stimulus packages such as PPP loans in the CARES ACT, many local businesses simply cannot wait for state or federal aid to come happen and remain in business.   Some have turned to their loyal clients and wider communities to help them meet their immediate needs in these uncertain times. Service businesses that cannot operate remotely, have launched coronavirus crowdfunding campaigns to help them support employees who have been temporarily laid off or had their hours cut due to COVID-19.  This has been very popular in the restaurant business.

If your business is considering a crowdfunding campaign to mitigate COVID-related financial losses, below is what you need to know and a few popular platforms to consider.

Where to Launch a Coronavirus Crowdfunding Campaign:  As with a regular crowdfunding campaign, it is important to do your research and find a platform that best suits your business needs and goals. Below are a few popular crowdfunding sites to check out:

• GoFundMe:  This Crowdfunding site was founded in 2010, GoFundMe is a popular crowdfunding platform used to raise money for emergencies and charitable causes. GoFundMe can be used by both individuals and businesses, but the most successful campaigns tend to center around service-based causes. Unlike other popular crowdfunding platforms, your campaign does not have to meet a deadline or goal requirement, meaning you keep everything you raise minus a 2.9% processing fee and 30 cents for every donation.
• Kickstarter. Kickstarter is a rewards-based crowdfunding platform designed to “help bring creative projects to life.” To launch a campaign, you set a fundraising goal, deadline, and different pledge levels for backers to choose from. Each pledge level provides something in return, such as a small gift, early access to a product, a personal experience and so on. Kickstarter is an all-or-nothing platform. A campaign that does not reach the fundraising goal within the timeline will go unfunded. For successful campaigns, Kickstarter charges 5% of the total funds raised, plus payment processing fees that range between 3% and 5%.
• Indiegogo. Like Kickstarter, Indiegogo campaigns are usually centered around creative works, charities or start-up businesses. Unlike Kickstarter, a campaign can be fixed or flexible. A fixed campaign is all or nothing, whereas a flexible campaign allows you to keep all the funds whether you meet your goal or not. If you do not meet your goal on a fixed campaign, you will not be charged any fees. For flexible funds, you will be charged a 5% fee plus a 3% processing fee, plus 30 cents per transaction.
• Kiva. Unlike other crowdfunding platforms, Kiva is a non-profit organization that connects entrepreneurs who need a loan with people who want to loan money. Kiva is ideal for individuals who are considered “unbankable” by traditional financial institutions because they have no collateral, no credit history or are otherwise seen as a “risky” investment.

What Can I Use My Crowdfunding Proceeds for?

According to the crowdsourcing site, GoFundMe, businesses that have used its platform to cover coronavirus losses have used the money they have raised for any or all the following:

• Health insurance for employees
• Monthly rent or mortgage payments
• Health insurance for employees
• Paid sick time for employees impacted by COVID-19
• Crisis pay for employees who are not sick but are out of work.
• Employees who need time off to care for their children.
• Other operational expenses you are struggling to pay.
• Matching discounts for their donation spread out over time.
• Discounted gift cards for when business is back to normal.
• Priority booking for service-based businesses.
• Free upgrade or add-on service.
• Buy one now get two during the first week back in business.

Unique ways to reward your customers for their support

While not every crowdfunding platform requires you to offer a “reward” in exchange for a donation, some platforms like Kickstarter and Indiegogo do. Even if your chosen platform does not, it may be a nice gesture to offer your patrons a “thank you” for their support, even if it’s just a coupon for a future purchase.

Here are a few unique ideas for thanking your customers for their generosity:

• Matching discounts for their donations spread over time
• Discounted gift cards for when your business is back to normal
• Priority booking for service-based businesses
• Free upgrade or add-on service
• Buy one now and get two during the first week back in business

By Debbie Gregory.

In this series of articles, we will examine the financial options and program available to business owners to fund their business.

In the two previous articles, we have looked at self-funding and venture capital. Now, we will look at a fun option… crowdfunding!

Crowdfunding is where you get a lot of people to invest in your idea, rather than finding one person, venture capital firm or bank to come up with the funds you need. People who are interested in your idea or product usually buy in at various stages. Usually, the “early birds” who get in on the campaign at the very beginning get the best deals, and the closer you get to your goal, the higher the buy-in. Once you have received the funds, you can get going.

Most business owners use a platform such as Kickstarter, Indiegogo or Patreon.

Your first step will be to set a goal for how much money you’d like to raise and over what period of time. Friends, family, and strangers then pledge money as short term supporters who will receive something in return, a gift if you will, which is usually your product.

Crowdfunding is very low risk for the business owner. For the fee you pay to the platform company, you get to retain full control of your company, and you’re typically under no obligation to repay your crowdfunders.

Some of the most successful crowdfunding campaigns have raised millions of dollars, and include products such as the Pebble Time smartwatch (78,471 backers pledged $20,338,986), the Coolest Cooler (62,642 backers pledged $13,285,226) and the game Kingdom Death: Monster 1.5 (19,264 backers pledged $12,393,139). Film and video projects included Bring Back Mystery Science Theater 3000 (48,270 backers pledged $5,764,229) and the Veronica Mars Movie project (91,585 backers pledged $5,702,153).

Because each crowdfunding platform is different, make sure you read the fine print and understand your full financial and legal obligations.

Veteran and Military Business Owners Association, VAMBOA,

According to the most recent census data, there are 2.45 million veteran-owned businesses in the U.S. Veteran entrepreneurs contribute to the economy through their businesses and their willingness to hire veterans.
There are a number of funding resources available to veterans in order to get their business off the ground, or expand an existing business.
• The Office of Veterans Business Development, through the Small Business Administration (SBA) supports new and existing veteran entrepreneurs and military spouses. The program offers a variety of training and financial services. The SBA Veterans Advantage Guaranteed Loans program offers loans of $150,000 or less with no guaranty fee. Larger loans carry a low guarantee fee. SBA Express Loans have no upfront borrower fee for eligible veterans and military spouses on loans up to $35,000. Leveraging Information and Networks to Access Capital matches businesses with SBA-approved non-profit lenders. The 7(a) Loan Program is the SBA’s most common loan program, and includes financial help for businesses with special requirements.
• The Department of Veteran Affairs is a great starting point when looking for financing, and has created the Veteran Entrepreneur Portal (VEP), which can help you quickly identify financing resources for your business.
• The Military Reservist Economic Injury Disaster Loan provide funds to eligible small businesses to meet necessary operating expenses that it could have met, but is unable to meet, because an owner/essential employee was “called-up” to active duty.
• The USDA Veteran and Minority Farmer Grant, run by the Department of Agriculture, aims to bring traditionally underserved people into farming through training and technical and financial assistance.
• The VetFran(R) program is designed to help veterans start their own business. While these aren’t traditional business loans for veterans, the program offers financial incentive for veterans to launch a franchise.
In addition to lending resources, don’t discount the value of networking resources. Who better to share advice than those who have walked the path before you?
• American Corporate Partners links veteran entrepreneurs with successful businesspeople for training and mentorship.
• National Veteran-Owned Business Association presents you with a great networking opportunity and the chance to learn much more about running a business.
• SCORE Foundation Veteran Fast Launch Initiative offers advertising, marketing and business mentoring, all at no cost.

• Syracuse University’s Institute for Veterans and Military Families provides entrepreneurial training. Their Entrepreneurial Bootcamp for Veterans program is free for post-9/11 veterans.
• Veterans Business Resource Center provides business consulting and mentoring.
• Veterans Business Services can assist in obtaining capital for your business.