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Small businesses across America are still dealing with the fallout from the events of 2020 and the resulting economic climate. Close to 100,000 small businesses that shut down temporarily have now closed for good, according to data from Yelp. While some business owners struggled to get approval for Paycheck Protection Program loans, others set their sights on alternative methods of funding, including crowdfunding.
Crowdfunding platforms have risen to prominence over the last decade and have been used to find investors for startup companies, raise money for charitable causes and launch innovative new products and technology. And as we head into 2021, it can be the jump start your business needs to recover from a rough year and experience new growth in the year ahead.
Crowdfunding connects businesses, entrepreneurs and individuals with investors small and large from around the world. Some are already loyal customers ready and willing to support your business, while others are total strangers. Crowdfunding is an important resource for new businesses looking for an injection of cash to get started, but it can also be an effective way to grow an existing business. Our primer on crowdfunding for new businesses will give you an overview of the types of crowdfunding and how they work.
Is crowdfunding the right choice to move the needle on your business in 2021? To find out, you need to begin by asking yourself some key questions:
There are more than 600 crowdfunding platforms out there, and the one you choose is dependent on your industry, the types of products and services you offer and your business goals. Here are some of the best you can choose in 2021 if you want to:
With nearly $5.5 billion pledged and close to 200,000 successfully funded projects, Kickstarter is the place to go for rewards-based crowdfunding. If you already have a loyal fan base and broad community or industry support, Kickstarter can be a lucrative way to connect with investors who want more from your business. Kickstarter takes a 5 percent fee and charges payment processing fees of up to 5 percent of every transaction. It’s a great platform if you’re looking to launch a new product this year, but remember: all campaigns must wrap up in 60 days, so you’re on a hard time line to build interest, seek funding and fulfill rewards.
Whether you’re looking to start up an industry podcast this year or offer fitness classes online, Patreon is the go-to platform to find funding for creative endeavors. Patreon offers a subscription-based service to investors, allowing them to pay a monthly fee to access your content. Costs are low to both creators and members (investors), which means you may not be able to retire on what you earn from the site, but it does offer a great low-cost way to get your creative products and services in front of interested supporters. Be aware that Patreon takes a 5 percent fee from every transaction processed.
If equity crowdfunding is the best approach for your business, Crowdfunder is the ideal platform. Crowdfunder provides an audience of more than 15,000 accredited investors looking for equity shares in businesses across a variety of industries. The platform is appropriate for both startups and growing businesses. Keep in mind that while it is free to create a profile and explore fundraising opportunities, you’ll need to pay a $299+ monthly fee if you want to move forward with launching a campaign.
If you need money but aren’t having luck with a traditional bank loan, LendingClub can connect you with investors who can provide your business with a one-time loan of up to $500,000. Benefits include a fixed interest rate, a 1–5 year repayment period and no penalties for prepayment. You will need to meet their eligibility requirements, which state that businesses must have been in operation for a minimum of 12 months and must bring in at least $50,000 in annual sales.
2020 was a challenging year for small businesses, and as traditional funding began to dry up, savvy business owners looked to alternative options, like crowdfunding, to keep their businesses growing. You can do the same as we head into the new year, but first, you’ll need to create a financial strategy that works. Remember that Bizee is about so much more than business formation, and we’re here to help your business grow.
Wendi is a freelance writer based in Indianapolis, IN, with over a decade of experience writing for a variety of industries from healthcare to manufacturing to nonprofit. When she isn't working on solutions for her clients, she can be found spending time with her kids and husband, working in the garden or doing more writing (of the fiction variety).
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