Money Matters

Crowdfunding tips: Alternative finance to support your business

Every investor struggles with finance; it’s a known fact that plagues many a good idea. […]

Struggling to gain financial support from your bank and need some crowdfunding tips so you can finance your business? You’re not alone.

Small and medium-sized businesses often find it challenging to obtain finance towards development or expansion. Accredited investors, banks and venture capitalists only finance an extremely small number of projects that come their way.

The onset of crowdfunding has provided an alternative while introducing significant disruption in this field.

Thanks to the developments of networks and the internet, the world has indeed become a smaller place. Crowdfunding platforms are where investors and entrepreneurs meet.

This article reveals how crowdfunding can help your business and provide you with an alternative path to financing your business, and read on for crowdfunding tips so you can successful get the funds you require.

Access to capital

Rewards-based crowdfunding platforms allow entrepreneurs to raise funds from the general community in exchange for simply giving their tangible products or other relative gifts. The point is, it can be done without giving up equity on the company or accumulating debt and, therefore, it mitigates risk.

Brainstorming like never before

One of the biggest challenges for small businesses and entrepreneurs is covering all the gaps and pitfalls that a new idea might have at an early stage of development.

Again, crowdfunding can help through exposure to a wider audience of interested investors. If the entrepreneur puts in the effort to create a campaign that engages the crowd, the feedback in the form of comments and ideas will no doubt help to cover those potential gaps.

It could also potentially inspire some other ideas.

Beware, though – if you believe your idea offers something that no one else is doing, it might be worth looking at protecting it with a patent or copyright.

Early adopters and loyal followers

The more interest you raise through crowdfunding and social media, the further your idea will go. Raising interest and investors who are ready to stake their money on its long-term success is a key factor in your success. These are the people that share your vision and will help it reach its full potential.

Tax advantages

Certain crowdfunding investments are eligible for tax benefits. These depend on individual circumstances, though. It’s worth looking at scheme such as the Seed Enterprise Investment Scheme (SEIS) or the Enterprise Investment Scheme (EIS), under which investors can claim back a respective 50% and 30% of their investment in income tax relief.

However, be aware that tax rules can change and a number of criteria must be met before relief can be claimed. If in doubt, if you have a tax adviser, they should be your first port of call.

Guide to alternative funding

Discover 10 sources of funding for your business and how to apply in our essential guide for startups and small businesses.

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Crowdfunding tips for your business

Jessica Ratty is the CEO and founder of Halo Communications and Marketing. Before this role, she worked at crowdfunding company Crowdfunder. Here, she shares five tips on crowdfunding to help you if you’re looking for finances to support your business.

1. Identify and engage with your network

Crowdfunding is about reaching out to the community around you. In business, this could be your current customers – or your future customers, if you are launching a new product or brand.

Start close to home with your friends and family, talk to your loyal supporters and identify your wider network. You’ll need their support – so make sure to ask them to share your campaign when it’s up and running.

2. Warm up your crowd

It’s time to get everyone excited. Let your crowd know you’ve got a great project in the pipeline. Share a few details and get your supporters ready to pledge.

In fact, 90% of the work on your campaign should happen before you go live and start funding. That includes getting your biggest fans ready to pledge on the day you launch.

3. Great rewards

Make people want to pledge to your project not just to help you out but because they get something amazing in return. Rewards should be unique, great value and non-geographical – appealing to everyone who is interested in your idea – making your project an exciting one to be a part of.

4. Plan: fail to prepare, prepare to fail

You need a plan, you need a team and you need to know who is doing what and when. Many of the most successful business crowdfunding campaigns have pledgers lined up before the launch date in order to drive momentum once the campaign is live.

It’s also a great idea to plan your social media, PR and marketing approach before you start so it’s plain sailing when your campaign launches.

5. Talk to your supporters

Communicate with your supporters before, during and after your campaign. Say thank you for their pledges. Keep them up to date with progress on your project, send out rewards quickly and keep talking to them – where is their money going, how is it helping your business, and so on.

These supporters are your customers and you want them to come back again and again – maybe even supporting your next crowdfunding campaign.

Guide to alternative funding

Discover 10 sources of funding for your business and how to apply in our essential guide for startups and small businesses.

Get your free guide
1,457 readers have downloaded this guide