Will Crowdfunding Work For My Business?

Last post: Sep 2, 2019

Crowdfunding – a means of raising money from a large number of people each making small donations, as opposed to sourcing the entire required sum of money from a single bank or financial institution – has gained ever-greater traction in the world of business funding in recent times. However, if you are to understand the potential relevance of crowdfunding for your own firm, it is important to become well-versed in the different forms that this innovative way of obtaining finance can take, and the associated advantages and drawbacks.

A rundown of some of the different types of crowdfunding

Do a quick online search for 'business crowdfunding', and you'll be presented with a wealth of information on the various models that have been adopted within crowdfunding. But of course, the overriding principle – of drawing upon the power of the Internet to source funds for a business or project from a large number of individual donators – is much the same between them.

You might come across references to equity-based crowdfunding, for example, centring on the principle of individuals and private investors receiving a percentage of a company's equity in return for the funding that they provide. However, actually obtaining money from equity crowdfunding investors can be extremely difficult, not least given such investors' tendency to demand a huge amount of information about your business's financial projections. 

This might lead you to consider bond/debenture-based crowdfunding as an alternative to equity. It's a type of crowdfunding that entails offering investors a financial obligation in the shape of a bond or debenture; it's hardly the most common form of crowdfunding, however. 

It's much more likely that you will be familiar with reward or donation-based crowdfunding. The former involves the business in need of funding offering some kind of benefit to donators – for example, the product or service that the money will be used to fund. 

Donation-based crowdfunding, meanwhile, involves people donating money simply because they believe in a particular cause and wish to help it to succeed. If you opt for this crowdfunding route, the donators won't expect anything in return for their financial support, except – of course – the success of your business or project. 

Alternatively, why not turn to us for a crowdfunded business loan? 

The specific type of crowdfunding of those above that might best serve your organisation's financial requirements will naturally depend on a variety of factors and circumstances. These include precisely what you are attempting to fund, what you might be willing or able to offer to investors, and your ability to tell a compelling story that will actually persuade people to agree to invest. 

There is, however, another route that might suit your firm: a crowdfunded business loan. As the name suggests, this is the form of crowdfunding that is most akin to a traditional business loan, except that rather than borrowing from a single lender or institution, you will be effectively doing so from a larger number of individuals who have joined forces to raise the funds. Thankfully, as is the case with a traditional loan, you'll only have to deal with a single party – the crowdfunding platform that arranges the process, rather than all of the lenders individually. 

Although you will need to satisfy certain criteria to qualify for a crowdfunded business loan through Choice Business Loans – including an at least two-year trading history, profitability and a good credit record – you might be attracted to this form of crowdfunding because of how it enables you to obtain both unsecured and secured loans. 

If you are looking to arrange an unsecured loan through our company, for instance, you may be able to borrow as much as £350,000 over a five-year term. As for if you are willing to take on a secured crowdfunded loan, borrowing several million may not be out of the question, subject to asset quality, credit checks and LTV. 

The scope for flexible payment schedules – encompassing the likes of interest-only and long amortisation profiles – as well as the option to obtain the loan funding anonymously, with the lenders not having your details disclosed to them, are further reasons why you might seriously consider a crowdfunded business loan. 

What's more, it doesn't have to take too long for you to obtain this kind of loan when you turn to Choice Business Loans. It's usually just a one or two-week process between your initial application and the payment of the loan.

Contact the Choice Business Loans team today, and we'll help with any queries that you may have about this highly regarded form of business funding, and take you through the steps of making an application that will enable you to source the financial support that are looking for.