Small business owners looking to grow their businesses typically pursue traditional business loan options. Unless they have plentiful savings or angel investors, entrepreneurs must apply for funding from traditional investing sources. Small business loans offered by banks represent the most popular source for small business owners to acquire more liquidity. Other business funding sources include the Small Business Administration, bank credit lines, and credit unions.
But what happens when none of the above are viable options for entrepreneurs and startups? As a rapidly growing alternative source of funding for small businesses, crowdfunding investing provides small business owners with the necessary capital and resources to grow their enterprises.
What is Crowdfunding?
Crowdfunding is the practice of raising money from a large number of contributors. Small businesses can attract potential investors by a number of mediums. One popular method today is via social media. Another tried and true method is by partnering and working with a reputable crowdfunding firm.
Traditional Loan Sources Dry Up
Since the financial meltdown of 2008, conventional loan sources have turned their backs on main street small businesses. Lending requirements have tightened considerably, forcing many small business owners to seek investing sources elsewhere or dip into their own personal savings and investments. Most large banks consider small businesses high risk due to the lack of profitability.
However, the mindset held by large banks does not apply to crowdfunding investors that search for innovative small business owners that create new markets for their products and services. Even with large banks recently easing their lending requirements, a growing number of small business owners have turned to crowdfunding for starting or expending their enterprises.
Why Small Business Owners Turn to Crowdfunding
By the end of 2015 crowdfunding will have grown to an industry worth more than $5 billion. So what makes crowdfunding so successful? Crowdfunding does not represent a capital source for desperate small business owners that need cash to pay off bills. What these profitable small businesses want is money to grow their businesses, yet do not have the time to wait for large banks to approve or disapprove their loan applications.
Crowdfunding investing takes little time to secure, especially when working with a crowdfunding firm through various channels. A crowdfunding professional can ensure that entrepreneurs and startups are properly matched up with investors in a particular niche market or sector to maximize the best opportunities for both parties.