Break Out From a Crowded Field with Crowdfunding

by: admin , March 11, 2014

Since the financial meltdown of 2007-2008, small business owners have found it difficult to obtain financing to grow their small businesses. Entrepreneurs and small business owners who struggle to meet payroll have to search for alternative ways to finance their small businesses. Over the past few years, an increasing number of small business owners have turned to the finance option called crowdfunding.

What is Crowdfunding?

Traditional sources of small business financing rely on bank loans and private investors who thoroughly research the small business that requests financing. Crowdfunding investors typically do not scrutinize financing requests from small businesses with the same attention to detail of banks and private investors.
The public funds crowdfunding campaigns via first, second, and third degree business connections. First degree crowdfunding investors may include family members, close friends, and professional peers. Once a small business crowdfunding campaign gains momentum, the second and third degree connections form online to enhance funding. Crowdfunding can cover infrastructure improvements, product development, and marketing plans.

Benefits of Crowdfunding

Crowdfunding is not only an entrepreneurial financial strategy, it also represents a marketing strategy that promotes small business. To secure crowdfunding, you have to promote your small businesses to a diverse audience, from personal connections to anonymous people who found your crowdfunding campaign online. Launching an online crowdfunding campaign extends the breadth of your small business social media marketing program.
Recruiting crowdfunding investors represents the front side benefits of the popular small business funding source. After you establish your small business as a viable investment option, you move forward with a stable financial base. Instead of spending time and money recruiting public investors, you tap into your established crowdfunding investors for additional financing for small business projects, such as the construction of a new facility or the acquisition of a competing small business.

Crowdfunding Differences

Crowdfunding campaigns differ for several reasons, but familiarity with your small business represents the most important reason you pay different interest rates and receive varied loan amounts. First connections, such as family members, require lower interest rates for crowdfunding campaigns. Until you establish a reputation of putting crowdfunding money to good use, you can expect to pay higher interest rates and receive lower lump sum financing from second and third degree connections. You can also receive crowdfunding from a well-financed “Angel” or from hundreds of small time investors who pool their money together to provide entrepreneurs with substantial financing.

Win Over Potential Crowdfunding Investors

You can win over potential crowdfunding investors by demonstrating that you know how to implement innovative small business strategies to make money. One way to raise potential investor awareness is by acquiring toll free vanity numbers. By communicating with your customers via toll free vanity numbers, you prove that you know how to maximize the return on your marketing dollars, while increasing brand awareness through the creation of catchy vanity numbers.

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