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Closely held businesses with growth plans and budding startups with great potential can find themselves in a “catch 22” of finding funds: In order to get funds, you need sufficient capital, but, in order to raise capital, you need funds. And your home and personal assets only take you so far.
So what do you do? Many entrepreneurs and owners who would not qualify for traditional fund sources have turned to crowdfunding or crowdlending as an alternative. Rather than trying to persuade one source to provide a large amount, you persuade a large number of people to each donate or lend you small amounts that will collectively add up to the larger amount needed.
Ongoing businesses and budding startups have successfully used crowdfunding, for example, to help renovate a microbrewery kitchen and to help support a “disco dog” LED dog safety vest controlled via smartphone.
CT Tip: Be sure to consult your advisor about federal securities and tax aspects plus any state rules as well.
We’ve listed below some plus-and-minus aspects of crowdfunding as well as some helpful tips for a successful crowdfunding campaign.
Running a crowdfunding campaign for your business could have benefits beyond financial gain. Some of the benefits crowdfunding include:
As great as the benefits of crowdfunding can be, crowdfunding does have some disadvantages to keep in mind:
After weighing your options, if you decide that crowdfunding is right for your business, here are some tips to help make your campaign a success:
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