If you’re not having luck with getting a small business loan from a bank and investors aren’t banging down your door to provide you with a smaller amount of cash to grow your business, crowdfunding might be the answer. Crowdfunding provides a way for startups to get financing (usually smaller amounts, like $10,000 or so) from multiple investors who pool their resources to reach the loan amount. We’ve heard about the great success Kiva has had in crowdfunding for impoverished areas around the world; now other organizations are working to provide the same concept to businesses.
How It Works
Business owners set up a profile on a crowdfunding site, with information about how much money they’re seeking, and what they plan to do with the funds. Whether or not the company is required to pay back the loan depends on the site. Prosper.com offers loans that are paid back with interest, but Peerbackers, IndieGoGo and Kickstarter treat those that fund projects as investors, and borrowers offer different perks, such as product samples or invitations to special events.