Crowdfund Loans for Small Businesses

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
What Is Crowdfunding?
Reward-based. With reward-based crowdfunding, individuals contribute as little as $5 to a brand’s crowdfunding campaign in exchange for a token of appreciation, such as a shirt with the company’s logo on it or a sample product. That might not sound like a lot of money, but with dozens or even hundreds of contributors (some of whom will likely give more), you can quickly raise thousands of dollars. Donation. This kind of crowdfunding allows people to donate without your being required to repay them or give them anything in return. Donation crowdfunding is often used for personal campaigns, such as to pay for a person’s medical bills, though businesses use this option as well. Equity. This type of crowdfunding is a bit like getting money from a venture capitalist or angel investor. You don’t have to pay back the funds you get, but each investor gets a piece of equity in your business, often in the form of stock. Debt. Also called loan crowdfunding, this variant lets you borrow money from interested parties just like you would from a bank, but there may be more strict criteria for you to qualify.
Is Crowdfunding Right for Your Business?
Take a new product concept from idea to creation Expand into a new market Buy materials to create products Serve more customers Hire staff Invest in marketing
How Can You Crowdfund Business Loans?
Reward-Based Campaigns
Donor Campaigns
Equity Campaigns
Debt Campaigns
Pros and Cons of Small Business Loan Crowdsourcing
Pros of Crowdfund Loans
Cons of Crowdfund Loans
Learn More About Lantern's Small Business Funding Options
About the Author
Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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