Crowdfunding vs. Traditional Financing for Your Business

Updated: Sep 4

Crowdfunding


Successful online retailers know that it takes money to grow a business. So, if you want to expand your inventory, add new features and functions to your platform, hire additional staff, launch a new brand or acquire a competitor, you need to look at how to finance your plans.


Traditionally, small business owners have relied on family, friends and associates for seed capital to launch their operations. If all goes well, you might bring in equity partners to help fund further growth, talk with “angel investors” who want a share of your company, or apply for a loan or line or credit from a bank or other lender. As your business grows, a venture capital or a private equity firm might be interested in making an investment in exchange for a share of ownership.


Now, there is another alternative to consider: attracting small investments from dozens, hundreds or even thousands of individuals through a process called crowdfunding. As a business owner, you pay a processing fee for this service.


Last year, the top crowdfunding platforms included GoFundMe, and Kickstarter, according to Crowdfunding.com.


Pros and cons of crowdfunding


One of the best reasons for considering crowdfunding is the ease and simplicity of launching a fund-raising campaign. All the major platforms will guide you through the process step by step, as you prepare your “pitch.” Because you are asking for relatively small individual investments, you don’t have to prepare a long business plan with detailed financial forecasts for a major investor or a lender.


Another plus is that you don’t have to give up a share of ownership in return for funding. You can repay your investors with a share of the profits from a successful crowdfunding campaign. Crowdfunding also lets you move forward with your plans without the financial burden of paying back a bank loan.


However, there is no guarantee that crowdfunding will generate the necessary funds. Many individuals prefer to contribute to “all or nothing” campaigns, where their funds are held by the CFP until a target is reached. If the total falls short, their funds are returned and the business has to start over again.


Another consideration is that many investors are attracted to innovative brands, technologies and business models. Unless your online store is distinctive enough to attract attention in the “crowded” financial marketplace, those individuals will find another opportunity, and you’ll need to resort to more traditional methods.


Clearly, crowdfunding is an important alternative source of financing for small, mid-size and large online businesses. So before reaching out to a new partner or applying for a loan, take a close look at the leading crowdfunding platforms to see if this new strategy can help you achieve your business goals.


If you decide to work with i Logistics USA, you are not just paying us to do manual labor. You’re paying for knowledge and experience on how to store your rewards safely, package them beautifully and ship them out quickly. You are paying for efficiency and customer satisfaction. The faster your backers receive their rewards, the happier they’ll be and the more confidence they will have in you.


iLogistics USA can provide a Crowdfunding Fulfillment solution for your backers in Miami, Florida. Give us a call to learn how we can help you maximize the efficiency of your operation. See what we can do for you by calling 1-305-909-0400 and as always, a team member will be happy to assist you.

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