What Crowd funding is and How it Helps Start-up Businesses

Recently, President Obama signed a JOBS Act law, which could have a positive impact on Crowd funding and the lives of entrepreneurs.

What is Crowd Funding?

Crowd funding is the collective effort where individuals network and pool their sources together, usually via the internet to support efforts initiated by organisations or other people. Disaster relief and startup companies are just two of the many sources that Crowd funding helps.

How Does Crowd Funding Work With Start-up Businesses?

If an entrepreneur has a start-up company, or they have a business idea they would like to start-up, Crowd funding can benefit them instead of going to a bank to ask for a loan. If they go to a bank, especially when they are just starting out, chances are, they won't be eligible to fill out a loan application. This is where Crowd funding can help them. They can attract a "crowd" of people, each of whom invest in the business idea by contributing towards an online funding target. Crowd funding platforms such as Faithfuner don't charge for pitches published by entrepreneurs, but they do take a 5% commission when targets are reached. Start-up businesses are able to create a strong support network, which is the main benefit of Crowd funding. Please go to Young Entrepreneurs Benefit from Crowdfunding and What is crowdfunding? to read more about how Crowd funding helps start-ups.

Different Types of Crowd Funding Methods

There are four different methods of Crowd funding, which include, donation, pre-sales, loans and investment-revenue, sharing and equity. Donation is when people invest for a charitable cause, pre-sales is when people invest a certain amount of money and in return receive goods or services equating to the same amont they invested when the goods and services are available, loans is when people loan a certain amount and are re-paid and investment-revenue, sharing and equity is when people invest a certain amount of money in exchange for equity shares or a small percentage of their revenue. The article, Crowdfunding 101: The Basics explains in depth the difference between each method and also each method's pros and cons.

A Good Tool To Have

Whatever the business start-up is, Crowd funding is a tool that gives entrpreneurs the opportunity to progress and shape their businesses when banks would not give them the time of day.