Now Reading
Is Crowdsourcing a Viable Source of Business Funding?

Is Crowdsourcing a Viable Source of Business Funding?

After a drop in lending to firms since the global recession in 2008, small business funding is once again increasing. Numerous high-profile banks have committed to billions of investment for businesses, with HSBC announcing an £8 billion fund available to small businesses across the UK. Bank loans are very common for small business funding because they’re often the first port of call for the business owner. Most banks have relaxed their lending conditions too, so small businesses are finding more success with being approved for a loan.

But banks are not the only ones providing funding to small businesses. There are plenty of other sources out there that a business owner should consider, which may be better suited to the nature and needs of their business.

Is crowdfunding a fad or is it here to stay?

Although bank loans remain popular, many alternative sources of funding have seen an increase in recent years. The crowdfunding case is particularly interesting – only a fifth of small businesses in the UK have heard of it, but it looks set to take off as it continues to evolve and reach a wider audience. Crowdfunding is unique because a business with a great product but less than stellar business plan can still secure funding – something that traditional bankers would view with disdain. For that reason, it’s become very popular with startups, with a number of funding campaigns going viral.

Some people view crowdfunding as a fad and not a secure source of business funding, but there are plenty of success stories to choose from. One of these in particular would be Ryan Gepper, an Oregon-based small business owner who raised $13.3 million through Kickstarter to develop a multipurpose picnic cooler. However, it should be noted that at this point in time, this is very much the exception to the rule, although crowdfunding is certainly possible if you have a wide range of contacts who have already shown an interest in your business or product.

But – Crowdfunding Has Drawbacks

Crowdfunding is not without its drawbacks. Consumer protection watchdogs have noted that crowdfunding is almost completely unregulated, with little protection for both business owners and investors. As a result, we will likely see regulation introduced over the next few years, with Germany approving legislation in April. It is important to note, though, that it’s unlikely that crowdfunding will become as stringent as traditional bank loans, so it remains a viable alternative source of funding for innovative startups.

While crowdfunding may not be suitable for everyone, it is undoubtedly one of the most intriguing developments in business funding in quite some time. It’s yet to be seen whether it continues to gain momentum over the coming years or if it becomes susceptible to the regulation that comes with traditional sources of funding.

View Comment (1)

Leave a Reply

Your email address will not be published.

© 2023 BLUNTMONEY. All Rights Reserved | Disclaimer

Scroll To Top
Skip to content