How to crowdfund your business – it’s easier than you think

How to crowdfund your business – it’s easier than you think

November 16, 2015

It’s UK Crowdfunding Week! As part of the dialogue about crowdfunding taking place this week, we’re publishing our short guide on how to use crowdfunding, one of the most popular new forms of alternative finance. Though it’s well known as a way to fund creative projects, crowdfunding can also be a viable way to fund a business if the business owner is steering clear of traditional bank loans.

Following the decline in bank lending, methods of alternative lending have become a popular alternative for small businesses looking for funding, and crowdfunding is one of the most well-known varieties. Crowdfunding platforms allow a large number of backers to contribute small amounts of money to a business. This money can take the form of a donation, a pre-order of the product or service the business is offering, or a loan. Many crowdfunding projects also offer rewards to their backers – everything from a part in a creative project to a custom product.

Crowdfunding stats

  • On average, technology products have raised the most through crowdfunding, raising £8,633,721 last year in the UK alone.
  • Business products have the largest average contribution, at £342 per person worldwide.
  • Community projects are the most popular crowdfunding campaigns in the UK, with 3035 active campaigns over the last year.

How crowdfunding works

  • First, you’ll choose the right crowdfunding platform for the business. Many platforms are specifically targeted to certain types of projects, such as creative or charitable work, so make sure you choose one that reflects your business plan. Rangewell can help you with this – just input your requirements and we’ll connect you with the crowdfunding platform that fits your needs best.
  • Next, set clear goals – make sure your campaign shows exactly how much funding you need and what you need it for. It’s important for potential backers to know exactly where their money is going.
  • Once your campaign is set up, you can’t just sit back and wait for the pledges to roll in – it’s important that a business keeps engaged with its backers by posting progress updates and responding to their questions and comments.

Advantages

  • In most cases, the money provided is in the form of a donation or purchase of equity or a product. That means there’s no loan to repay, so you won’t go into debt.
  • The process of crowdfunding means that you increase awareness and create press at the same time as you raise funds, so a successful campaign means not only funding your business but establishing a solid consumer base for your products or services.

Disadvantages

  • It’s entirely up to the business owner to get the word out and promote their crowdfunding campaign, so there’s a significant amount of marketing work as well as the usual budgeting and planning that must be done in order to be successful, a process that is not necessary when applying for traditional loans
  • Most crowdfunding platforms work on an “all-or-nothing” basis: if the business doesn’t meet its original funding goal, it won’t be able to keep any of the funds that were raised.

The Rangewell platform features thousands of loan products from over 200 UK business lenders. If you’re interested in crowdfunding, click the button below to find out more about how Rangewell can connect you with business finance that suits your business’ unique needs best.

Crowdfunding statistics were drawn from data provided by The Crowdfunding Centre.


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Sarah Thornton

Content writer