By Steven Gallagher
When it comes to funding your home business, you have many options available to you, including loans, credit cards, and crowdfunding platforms like Kickstarter and Indiegogo. However, if you are looking to start your business at home, those options might not work that well for you. Unless you have enough cash saved up in the bank, paying interest on loans and charging purchases on your credit card will likely eat into your profits right from the start.
What Is Crowdfunding?
Crowdfunding is about raising money from large groups of people — usually through social media platforms like Facebook or Twitter. There are several ways you can raise money from a crowd: You can ask for donations, offer rewards in exchange for contributions, or sell shares in your company to investors. Crowdfunding has been widely used on sites like Kickstarter and Indiegogo.
What You Need to Know About Equity Funding
For those of you who have tried unsuccessfully to get a bank loan or line of credit and are wondering where else you can get funding, there is equity funding. This type of funding is available from private investors, angel investors, and venture capitalists. When looking at these sources for funding, you must understand precisely what each of them does and does not offer. In some cases, equity funding can be a last resort, but it can be an extremely beneficial source of funds when done correctly.
Crowdfunding vs. Venture Capital
Both crowdfunding and venture capital are options when it comes to funding your home business. The two forms of funding have distinct strengths, which are useful in different situations. Crowdfunding is essentially asking a large group of people (the crowd) for money. On platforms like Kickstarter or Indiegogo, you are pitching a project, such as a new product or campaign, and getting people to contribute funds (in exchange for perks like early access or samples). Crowdfunding can be great if you need small amounts of cash from many investors — say if you are looking for $2,000 from 200 investors but not so good if you need larger sums.
Tips for a Successful Crowdfunding Campaign
Before you start your crowdfunding campaign, consider that crowdfunding sites like Kickstarter, Indiegogo, and GoFundMe are not guaranteed success. You need a compelling video that tells your story, an attractive page design, and excellent marketing skills to make it work. You also need patience: Research shows that 50% of projects on these platforms do not reach their goal; however, if you are able to secure funding through a website like these, starting it can be beneficial. A successful crowdfunding campaign will help bring in cash, but it can also provide social proof and instant credibility to new customers and investors.
Conclusion
Getting a bank loan for funding your home business is one of those things that many people are just going to tell you “no” right off. There is no magic formula, but there are ways you can get money invested in your home business without having to go through conventional channels.
Of course, if your business is well established and in good standing, there is nothing wrong with using traditional financing methods. It depends on what stage of business you are at and how desperate you are feeling (if at all). If it does not look like an outside investor will be buying into your company anytime soon, consider alternative means such as crowdfunding sites or even non-profit grants for small businesses.
Author: Steven Gallagher – 1stUKmortgages.co.uk
Steven Gallagher was born in Switzerland and raised in Canada, except for the time when he moved back to Switzerland and attended high school there. He studied Economics and Business at the University of Zurich. When he is not writing, he can be found wandering through nature or journaling at a coffee shop.
