Crowdfunding is booming, so much so that there are many crowdfunding platforms on the Web. Companies use this method of financing because it has several advantages, especially when compared to traditional financing solutions.
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Crowdfunding: definition
The participative financing is a technique allowing to collect a sum of money coming from individuals or companies in order to finance a project. It is a method of financing that can easily be found on the Web thanks to sites that put project owners and investors in contact. Moreover, it is a significant point for the companies of the Social and Solidarity Economy to appeal to more people in the framework of the financing of projects.
Participatory financing is a complementary or alternative mode of financing for companies with projects.
Crowdfunding can be done in multiple ways:
- a donation with or without consideration;
- an investment made in capital ;
- a credit with or without interest.
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The benefits of crowdfunding for companies
A fast process
Compared to traditional financing methods, crowdfunding is a solution that is quick to implement. Once the project is validated, it is enough to find the crowdfunding platform on the Web. The challenge is to inform the public about the future project or idea:
- advertising on social networks ;
- posting ;
- making use of one’s connections.
The absence of a personal guarantee
This is undoubtedly one of the assets of crowdfunding that investors appreciate the most. Even if it is similar to a loan, it does not require a guarantee from the entrepreneur. The creator or the buyer of a company will not put in danger his personal patrimony by being a guarantor.
The financing of its precise needs
The participative financing is also ideal to finance the needs which cannot be taken in charge by the other financiers:
- need for expenses to carry out its research ;
- need in working capital.
The only way that the creator has to finance this is to play on the terms of payment or to do factoring.
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A better support
Participative financing has several advantages at this level. First of all, it allows the project owner to carry out a market study at a reduced price. Then, in addition to the financial interest, it allows to take advantage of advices and accompaniment to start his business. And once the project is launched, participative financing gives the possibility to have a loyal clientele.
A method of financing that has a price
The absence of a personal guarantee has a counterpart. The investors take a bigger risk than a financial institution, that’s why the remuneration is more important. Indeed, the interest rate of the credit can go up to 10%.
