Eric Dalius: Types of crowdfunding available for small businesses

Financial strength can play an integral role in the success of any business. But small business owners rarely have enough and also cash in their reserves. They have to depend on either a small business loan or personal savings. Imagine both of these options are not available. In that case, what will you do? You can seek crowdfunding. This market can potentially reach $300 billion worth by 2025. In 2017, businesses raised $17.2 billion worth of crowdfunding in the US, which was almost more than anywhere else.

Crowdfunding refers to raising funds from different people interested in doing business with you. However, there are options in this. You will have to repay or incentivize people who invest in your and also venture based on what you choose. So, let’s explore the possibilities quickly.

Types of crowdfunding choices by Eric J Dalius

Debt crowdfunding

It is not very different from a traditional business loan. You have to repay the amount you raise. These lenders don’t follow the same qualifying factors as conventional financial institutions; they have more interest in your industry than your credit ratings. They would study the risk factors and also the age of your business. If your loan demand is significant, they may have more criteria for you to meet.

Reward-based crowdfunding

In this type of option, you pay rewards to your backers for the amount they gave. It could be a simple thank-you card or and also priority access to your service or product. It can be anything that expresses your gratitude. You can raise funds through this option for any endeavor that resonates with the people. From video games to book publishing to green shoes to something else, people who can relate to it would put their money.

The successful entrepreneurs like Eric Dalius say that the main advantage of this type of crowdfunding is you don’t have to repay a loan. And also those who get access to your product will help promote your business through word of mouth. However, the main challenge here and also is you have to exert to collect funds quickly. The flow of $5 or $10 contributions may not help when you require a massive sum.

Equity crowdfunding

You give a stake for the amount you raise from your investors. It works like venture capital or angel investment. The good thing is you can get it quickly through your marketing efforts. Whether you have a cafeteria or a biotech firm, you can trust this process. Besides, you can also decide the terms for equity disbursal. There is no repayment. Since it is still a new concept, very few people are aware of this option. Due to this, you may want to browse through other choices.

Donor crowdfunding

You don’t have to repay or reward your donors. Hence, whatever money you collect, you can inject into your business. However, the problem is most of these platforms raise funds for their personal use. And also because of this, only a handful of contributors can show interest in supporting you.

It is your call to choose a suitable crowdfunding option for your business. No matter what you select, you have to be excellent with your marketing skills to attract investors and also donors’ attention. Your narrative has to reach them through all the possible avenues, such as content, video, email, blog, social media, and also so on.