Crowdfunding vs traditional fundraising is an interesting comparison that can be observed to have experienced significant change in the last few years. As crowdfunding continues to grow in popularity, its acceptance as a normal mode of raising money for business purposes also grows.
In this article we will cover the key differences between the new Crowdfunding movement and the more traditional fundraising model.
Raising money to get a business idea off the ground has historically been an incredibly tricky process, with several hoops to jump through and no guaranteed investment. As technology has developed immensely in the last few years, so too has the ease at which entrepreneurs can demonstrate their ideas and raise the money they need.
The more traditional methods of fundraising that existed before crowdfunding were venture capital and angel investing. Also, going directly to the bank and asking for a loan was the only viable option for many people. These methods are of course still valid ways for innovators to seek investment. However, crowdfunding has given the opportunity to raise money to those who are not traditionally seen as eligible by venture capitalists, angel investors or the banks.
Those who invest their money in new businesses have typically been known to be quite selective with where they will place their money, and with good reason. The very purpose of investing money is to see it grow. Therefore, if an investor or the bank does not believe a new business will become profitable, then they are unlikely to take a chance on it.
Crowdfunding Vs Traditional Funding which is the best option?
As aforementioned, going to the bank to ask for a loan is traditionally one of the most common ways to get a loan. During this process you, as a borrower, would make an application to the bank to borrow the money that you require for your business needs and present your case to them. There are several deciding factors on whether this loan application would be successful or not. This can be quite a difficult process because of the limited amount of banks you would be able to approach and the various requirements that they impose their borrowers.
How Has Crowdfunding Changed The Game?
As well as opening investment opportunities to countless entrepreneurs that would previously have had limited access, crowdfunding has also increased awareness for many companies. The combination of a crowdfunding campaign with a comprehensive marketing strategy is a fantastic way to get the message of a business out in front of the consumers.
Both traditional fundraising and crowdfunding though Go2 Business Loans are essentially debt investment. Both of these methods of lending offer secured debt finance, however the way in which the process works is quite different. When you raise money by securing a loan from Go2, this will typically be over a period of one to five years. It is similar to the kind of loan that a conventional bank would offer a small to medium sized enterprise. Although the security requirements of both types of lender are generally quite similar, there are several important differences of securing a loan through Go2 that will benefit the borrower. These benefits include quicker access to the money as well as more transparency when it comes to the terms of the agreement.
Additionally, as a borrower, you are not only relying on one entity. There is a huge P2P investor pool for you to choose from. So even if one lender rejects your proposition, there are many more to approach.
When it comes to contemplating crowdfunding vs traditional fundraising, it is important to remember that traditional fundraising still has a very prominent place in the investment world. However, crowdfunding has expanded this investment world to include a wider variety of potential businesses!
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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