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Could crowdfunding help your business grow

Crowdfunding is a revolution in terms of helping SMEs achieve funding and investment for further business ventures. Unsure what it’s all about though, or how you think it could help your business? Well, that’s why we’re here to explain…

What is it?

Crowdfunding is an alternative method of raising finance for a business project. Unlike traditional angel investment, where an affluent individual provides capital and typically takes a larger share in a business, with crowdfunding an SME can attract a ‘crowd’ of people, who may not have invested in shares before, each of whom takes a small stake in a business idea, by contributing towards an online funding target.

Old vs new. Pros and cons.

Many SMEs can struggle to get the funding they require in the traditional methods, e.g. a bank loan, that’s why many turn to crowdfunding. One of the advantages of said funding is that you collect money from many people, instead of one institution as a bank or investment firm. The requirements are less strict than those of banks and so therefore crowdfunding gives many entrepreneurs access to capital. However the disadvantages stack up too, for instance if the target amount isn’t reached, potential investors get their money back and the business goes away empty handed. Or if your business idea isn’t protected, as it’s in the public arena it runs the risk of being copied.

Who are they?

Companies like Crowdcube and Seedrs sell shares from as little as £10 per investor, making these sites extremely attractive not only to investors but to SMEs as well. It’s a really positive outlook for SMEs who are not only about to set out on a new venture but may also be on the flipside and are looking to expand.
So whether it’s another shop in a new location, updated machinery or even expansion into a new venture, crowdfunding could be the answer. Don’t just take our word for it though, there are plenty of case studies on show at Seddrs who can prove that crowdfunding can improve the performance and profitability of your business.

Are you in or out? We’d love to hear your opinions on crowdfunding, tell us your thoughts @ClearBusinessUK

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