In one sense, you could look at crowdfunding as an aggregate business loan for the future; it is based on the traditional form – but enhanced in a way that is only really possible with the modern-day explosion of the internet. The ability it provides to reach numerous people is what really gave rise to crowdfunding as a viable small business strategy. This social network-driven, peer-to-peer lending form has several benefits that we will elucidate below.

What is Crowdfunding: A Short Primer

Basically, the gist of it is as follows: you need capital to pursue a business idea. You then approach one of the many online crowdfunding platforms (sometimes run by an individual, in fact) and post your idea to a large pool of users interested in general and specific business ideas. The hook is that whatever they donate, presumably you will recompense them with interest as your idea comes to fruition and becomes successful

Greater Flexibility with Debt

Since banks have no part to play in crowdfunding, you needn’t suffer the months-long application process before the delivery of funds – neither are you responsible for the large fees. The only fees, in fact, are the percentage that the online platform extracts for providing the said platform. There’s no real application process, either – you are, of course, required to inform the prospective contributors as to the intended use of the money they are going to lend,

More Marketing Knowledge Is Necessary

With a bank loan, your goal is convincing the bank to release funds based on your creditworthiness and business model. The marketing aspects of your business are not really their concern, frankly; the opposite is true with crowdfunding platforms. You have to have a robust marketing plan before you even petition for money, otherwise your campaign will fall flat and you are unlikely to receive enough applicants to pursue your business idea. 

As you can see, crowdfunding has several distinct advantages over traditional business lending. It can be a huge boon to your business strategy, as long as you can conjure a marketing campaign that utilizes its attributes.