Using Crowdfunding as a Micro Loan Avenue for Small Businesses

Crowdfunding has taken the funding industry by surprise with its massive appeal. Today there are hundreds of such sites allowing entrepreneurs, artists, social workers and others to seek public aid to start their venture. For small businesses, it can be considered a form of microloan which need not be paid back. In comparison to how microloans work, crowdfunding can thus be seen as an attractive option.

Billions of dollars have been raised via several crowdfunding platforms in recent years, and the total market is expected to touch US$1 trillion in 2025! Crowdfunding is thus a serious contender for entrepreneurs and small businesses if they can crack the challenge and come out with an attractive campaign to find online donors.

Crowdfunding allows for both cash and equity types of investments. The cash and rewards based platforms run campaigns with a set goal to be achieved in a certain time duration. Small business owners can ‘presell’ their product or service and raise funding, in exchange for discounts, rewards, goodies and other complimentary offers for donors and backers. The equity based platforms require granting of shares to donors.

Originally used by artists, musicians, authors, and film makers, crowdfunding today is a very organized activity. It is used by charities and non-profits, individuals working for a cause, or those seeking donations for emergency situations. For innovators, crowdfunding offers plenty of benefits, as they can presell their innovation here and raise funding for launching and manufacturing their product.

Small businesses can look at crowdfunding if they think there business idea, products or forthcoming venture will be of interest to the public at large. Crowdfunding isn’t considered attractive for funding B2B activities. At some platforms, not reaching the target amount also results in forfeiting the amount received. As an alternative source of raising funds when other avenues do not work, crowdfunding is a serious option for new ventures and small businesses with attractive propositions.

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