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During COVID Use Crowdsourcing to Support Your Business

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By Debbie Gregory.

LinkedIN Debbie Gregory VAMBOA VAMBOA Facebook VAMBOA Twitter

 

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.
  • KickstarterKickstarter 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%.
  • IndiegogoLike 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.
  • KivaUnlike 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,

 

Funding for Veteran Business Owners

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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.

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