Crowdfunding is one way of securing finance for your future.
Crowdfunding is a modern way to finance ideas and opportunities
Crowdfunding is about persuading individuals to each give you a small donation of say$10, $50, $100, maybe more. Once you get thousands of donors, you have some very serious cash on hand to develop your idea or opportunity.
This has all become possible in recent years thanks to a proliferation of websites that allow non-profits, artists, musicians and businesses to raise money. This is the social media version of fundraising. There are more than 600 crowdfunding platforms around the world, with fundraising reaching billions of dollars annually.
One of the biggest issues in businesses, non-profits and small communities
How to improve the funding of small-medium enterprises (SMEs), non-profit organisations and small regional, rural and remote communities is a worldwide issue. It requires governments and financial institutions of all shapes and sizes to have a better understanding od small and how better financing would lead to fewer failures.
Innovative and start-up SMEs are among those that find it most difficult to find external financing at the right price. The cost of raising funds is an enormous burden as they go from one financier to another.
Government grants seem easy enough to get, but are, as a rule, too hard to come by and are very time-consuming, not to mention the micro-managing that comes with government funds. Governments are too risk adverse to effectively handle grants to SMEs. Because they lack practical SME experience they make the mistake of being afraid to make mistakes.
All manner of studies and investigations are undertaken to assess the problems to be faced. The challenge for the governments and financial institutions will be to convert their research into concrete action that increases the availability and reduces the cost of funding.
“When all else is lost, the future still remains”. Christian Bovee
SMEs make a significant contribution to the economy. They provide more than half the private sector’s activity and approximately 60% of its employment. Further, they contribute much of the competition and innovation that underpins productivity growth in a national economy. Productivity growth will be one of the factors that allow an economy to successfully transition towards an economy less reliant on specific resources.
While access to financing for many SMEs has improved over the past few years and many SMEs do not find accessing capital a pressing problem anymore, there is still a long way to go. The terms and conditions attached to credit for SMEs have tightened since the financial crisis of 2007/2008 and many SMEs still experience problems accessing sufficient financing.
Options available to improve funding capability
- Facilitate the promotion of crowdfunding as a sound financing initiative.
- Use a crowdfunding specialist advisor and platform.
- Considering what technology could help financiers better understand SMEs.
- Better financial education of prospective borrowers would improve their success rate.
- SMEs to explain their business cases in the language of financial staff.
- Train financial staff in the language of SMEs
- Set up lending criteria that address the risk of failure.
- Credit guarantees could encourage financiers to take on more speculative opportunities.
- Reforming restrictions on small-scale equity offerings.
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Crowdfunding brings many benefits to the businesses and non-profit organisations who use it well. If you’re looking to raise funds for your latest venture or to get a new venture off the ground with the support of potential customers and backers, then crowdfunding could well be your answer.
Every idea requires resources from somewhere to become a reality, whether it be in cash or kind. Before crowdfunding, you had the unenviable task of the having long and difficult negotiations to obtain the funding your want.
Options included applying for loans, searching for grants, pitching venture capitalists, borrowing money from family and friends or tapping into their savings which you needed fo person living.
What I like about crowdfunding is that it provides a method to obtain the ongoing funds you need with the support of an engaged community.