Crowdfunding is an interesting way for companies who are seeking finance. For an investor, investing your money via crowdfunding could be interesting as well. In this article, we will discuss the benefits of crowdfunding for both the investor and the fundraiser.
Speed
A crowdfunding platform assesses a credit application for viability. With a crowdfunding platform, the turnaround time is short, and some platforms guarantee a response within 48 hours. As a fundraiser, you will receive an answer within a week. If this is positive, the fundraiser still has to prepare the presentation on the platform.
Depending on the height of the loan, in practice, the funding time for projects is usually short. The time can vary from around one hour to a few days.
Start-ups
Banks don’t always finance start-up companies. Start-ups must therefore tap other financing channels. For start-ups, the combination of their own money and financing with crowdfunding is very attractive: the equity capital forms the safety net for the risk. Crowdfunding provides additional financing plus publicity.
Because of crowdfunding platforms, everyone can support a start-up company with some money. Investors like to invest in companies where they see a future in. As an investor, you are not only financing the project; you are an ambassador as well. This makes investing in a start-up interesting for an investor.
Banking issues
One of the reasons people are looking for a way to invest their money in another way than to put it in the bank is that sometimes you receive a negative interest in your money. In The Netherlands, some banks already announced that they would calculate negative interest to their customers. For example, ING bank has announced that they will calculate a negative interest of 0.5% to customers with an amount of money more than €100.000 per bank account. With other Dutch banks, the threshold is between €250.000 and €500.000. Wealthy people are looking for different ways to invest their money rather than to pay interest for their savings.
On the other hand, crowdfunding can increase a company’s borrowing capacity from the bank. For example, a company needs €500.000 to finance their project; the chances are that the bank will reject the application. If the fundraiser raises €300.000 through crowdfunding, the bank is more willing to finance the remaining part.
Accessibility
Crowdfunding is accessible for everyone. On some crowdfunding platforms, you can already invest from 100 euros. This makes crowdfunding accessible to investors with different wallets. Due to the low investment amounts, the investor can easily spread their investment over several projects, reducing the risk in the investor’s portfolio.
Because of the accessibility for investors, the fundraiser can reach more people for financing the project. Instead of one financier who funds the project for 100%, the fundraiser will raise the money from more financiers.
Written by: Julia van der Kooij
