As the economy is expected to toughen up this year, traditional financial institutions will continue to tighten their credit environment in order to contain potential risks. It is thus timely for businesses, especially SMEs, to consider and explore alternative sources of financing such as crowdfunding.
Crowdfunding, in the past, has had a reputation of having less stringent regulations than traditional financiers and providing lack of proper security measures, hence people thinking that this method of funding puts investors at risk, but the industry is misunderstood.
Here are the good things about it.
- Applying for a loan or pursuing other capital investments are two of the most painful processes that every entrepreneur has to go through, especially during the early stages of the company. Crowdfunding is a great alternative finance option if you have struggled to get bank loans or traditional funding for your business.
- Crowdfunding provides faster access to finance. One of the main advantages of crowdfunding platforms is their ability to provide businesses with faster access to finance.
- The momentum created by successful crowdfunding campaigns can attract potential investment from traditional channels and attention from media outlets. Pitching a business through crowdfunding can be a valuable form of free marketing and result in media attention. Press coverage will create more eyes on your campaign and create lasting brand awareness for your startup.
- Showing investors that your business venture has or can receive sufficient market validation at an early stage is hard, however crowdfunding makes this possible. Also ideas that may not appeal to conventional investors can often get financed more easily when potential customers show interest in your startup’s product or service which demonstrates to your investors that people believe in what you’re doing.
- In essence, crowdfunding is an excellent way for entrepreneurs to receive the financing and get the exposure they need in order for their ventures to grow. With the industry still evolving (in 2015, the alternative finance market grew to £3.2 billion), and becoming more efficient, there is no better time then now to take advantage of the associated benefits.