Top 4 Benefits of Crowdfunding for your Small Business
Updated: Aug 10
For much of human history, businesses have gone to a bank to get the money they need to grow. In many cases, the transaction is purely financial: the bank lends the business the money, and the business pays it back, principal plus interest. While this lender-borrower relationship is beneficial for both parties, it's not optimal: the business doesn't get any advice or support about how they should grow. What's more, the customers and other people who support the business, are rarely part of the conversation.
The passing of the JOBS Act offered an innovative solution for businesses to raise money: crowdfunding. The beauty of crowdfunding is that it combines all of the financial benefits that you get from a traditional bank loan, with a whole lot of love from your customers!
Crowdfunding gives you the opportunity to tell your story.
Traditional lenders stick to a tried-and-true playbook to determine the creditworthiness of businesses; it’s more of a numbers game designed to minimize the lender’s chance of financial loss. Crowdfunding, on the other hand, places the decision to lend in the hands of the people who know you best: your friends, neighbors, and loyal customers.
You get to test your idea with your customers before making the big leap with crowdfunding.
Traditional lenders may give you the money that you need, but they can’t tell whether your next project will be successful. Running a crowdfunding campaign helps you get a much better picture of what your customers truly want. By voting (or not voting) with their wallets, your customers are telling you how likely your new project will be successful. With the feedback from your customers, you’ll be able to validate your idea before committing to the financial future of your business.
Crowdfunding generates marketing buzz about your new project.
It's a great way to build buzz around your new business or project idea while it's still in the works! Your customers are already interested in staying up-to-date with how your business is doing. Announcing the new project through a crowdfunding campaign brings an added sense of novelty—you're telling them that not only will this project improve their experience as a customer, but also they have an innovative opportunity to contribute to this project. Get people excited, committed, and invested (financially/emotionally) in your growth! Traditional lenders, on the other hand, will rarely provide marketing buzz to get people excited about your new project.
Discover who your biggest fans are, and turn these customers into brand evangelists with crowdfunding.
They’re already stopping by your business every week. They’re already liking every Instagram picture that you post. Now imagine how much these customers will spread the word about your business once they’ve invested in your crowdfunding campaign. By rallying your customers, you can turn them into brand evangelists, creating lasting relationships that'll drive more good will and customers to you.
Interested in learning more about the different forms of crowdfunding? Check out our blog on Which Crowdfunding Tool Is Right for Me?.