What is Crowdfunding?
Crowdfunding can be categorised into two specific ways for businesses to generate funding, Equity Crowdfunding and Reward-Based Crowdfunding.
Equity crowdfunding is a means for a business, usually a new start up business or even simply just a business idea, to generate funding from third parties to either start the business, fund the initial stages or provide an injection of capital to an existing business. In return for the funding provided, the business owner would provide shares to the investors i.e. equity, so that the investors own part of the business. With the increased popularity of Crowdfunding websites, businesses are able to easily reach a number of investors, “the Crowd”, who pool their money together to invest in businesses in exchange for an agreed equity stake. It is important to note that funds raised through Equity Crowdfunding means that business owners give away part of their ownership in exchange for funds received.
Reward-Based Crowdfunding is similar to Equity Crowdfunding except rather than equity being provided in exchange for the investment, the investors agree to provide funding in exchange for a Reward. Typically this would include the business’ product for free before it goes on sale or at a significant discount, there may be certain hurdle rates set by the business such as a small reward for those investing £100 and a large reward for those investing £1,000. Reward-Based Crowdfunding is a way for new businesses to generate funds where other methods of raising funding would not be appropriate whilst the business owners retain complete ownership.
Why would I need the assistance of a finance professional?
You are looking to generate investment into your business, other forms of borrowing such as loans, invoice finance and asset based lending products are not appropriate for your circumstances, you have also considered Peer to Peer Lending options and you prefer to go down the Crowdfunding route. Remember through Crowdfunding you are selling via an online platform to a range of potential investors who will include high net worth individuals and venture capitalists right the way through to inexperienced financial investors / members of the general public. It is therefore important that you put together the best possible case for selling investment in your business, project or idea in order to give you the greatest opportunity to generate investment. This is where our team can assist, which may include involving some of our Harrisons Advisory team to help you with a business plan, financial information and projections.
For more information on Crowd Funding or indeed any of our other products and services, complete the Get A Quote, Contact Form or email firstname.lastname@example.org. Alternatively simply telephone our national rate number 0845 601 5343 or contact your local Harrisons office, details of which can be found within the Contact Us section.