How Does Crowdfunding Work for Borrowers?

Is a question that potential business owners often ask as they research new ways to get the funding they need. When you are seeking funding for a business opportunity, crowdfunding can be one of the best ways to find the investment you need.

In this short article we will cover how crowdfunding can work for borrowers 

As you embark upon this process and begin marketing your crowdfunding campaign, you have the potential not only to raise money from investors, but also to increase awareness of your brand business ideas. Having a variety of support from a large number of investors is great for a borrower in this regard and that is exactly what crowdfunding can provide.

The concept of raising money by asking a large number of people to contribute, when done properly, is generally an effective way for a borrower to find the investment they need. There are several different ways to crowdfund for investment in order to raise the money required to put a business idea into motion.

Peer to Peer Lending

This is also known as social lending and is a great way to reduce the high costs often associated with the debt sector. In this instance, instead of seeking to borrow cash from a large corporation, a borrower can be connected directly with a saver. The whole process is online, therefore cutting overheads and allowing for a quick, low-cost transaction. The money will then be repaid by the borrower to the saver at a pre-determined interest rate. This is great for the borrower because the rate of interest should be lower than going to a bank. It is also great for the lender as they normally receive a higher level of interest then they would if their cash was sat in a savings account. 

Equity Crowdfunding

Equity crowdfunding involves people investing their cash into the business venture of the borrower. Instead of the borrower returning the investment amount to the lender with interest, the investor will instead generally get an equity stake in the business of the borrower. However, it can also be agreed that the borrower will give the investor a certain amount of money back once the business becomes profitable. Equity crowdfunding is generally most suited to borrowers who are trying to attract a large amount of capital to their business venture in a relatively short amount of time. This is great for the borrower because they are able to go ahead with their plans without immediately having to worry about loan repayments, as they would with a traditional lender, such as a bank. 

If you are an entrepreneur with a business idea, then finding funding to move forwards is most likely going to be one of your priorities. You may be aware of crowdfunding and maybe you have often asked yourself the question, ‘how does crowdfunding work for borrowers?’. If your questions have now been answered then now is the time to begin your crowdfunding journey. 

Sign up to GO2 Business Loans today as a borrower and you could soon have the cash you need to grow the business you want!

This is peer to peer lending and your investment is at risk. We encourage investors to diversify their portfolio and to review all investments to ensure that they meet with their own investment criteria.

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