Crowdfunding Opens Up Financing Possibilities

Crowdfunding offers investors another alternative for obtaining financial backing and loans. With this alternative money-generation tool, individuals can start or expand businesses, buy real estate property, or fund other types of creative ventures or projects.


How Crowdfunding Works

Obtaining bank loans for nonconventional projects and ventures is difficult, to say the least. Banks typically loan money to more traditional loan applicants, especially when there is little risk involved. With crowdfunding, new businesses and creative entrepreneurs can get their innovative ideas off the ground with a little help from their friends, because that’s where the money comes from. The financial contributions:

  • Come from a large number of individuals

  • Are usually gathered via the Internet, often through social media sites

  • May be pooled from friends, family, colleagues, as well as like-minded individuals in the public at large

Crowdfunding Model

Typically, the crowdfunding model is comprised of three participants; The Prodigy Network for example follows a similar business model including:

  • The initiator of the project, also known as the idea generator

  • Supporters of the venture, which may include individuals as well as groups

  • A moderating organization, also known as the platform, which brings these parties together to launch the venture

Starting and Expanding Businesses

One of the challenging aspects of starting or expanding fledgling businesses is that banks don’t want to loan money to them, because they are not well established. This can be a stumbling block for some innovative, creative, and ingenious projects that need greenbacks to move forward. Typically, brand-new companies or those that are looking to expand are considered too risky for banks to approve loans for. This may be because:

  • New companies lack lengthy track records as successful businesses, simply because they are new; traditional banks want to see proven success before lending money.

  • Start-ups have weak credit histories, simply because they haven’t been around long enough to generate credit scores.

With crowdfunding as an alternative to traditional funding routes, startups and expansions can move ahead to fruition.

Real Estate Ventures

Another area where money raised in nontraditional ways can open doors for investors is in real estate. Crowdfunding real estate ventures can be accomplished through Internet sources such as social media outlets. The online gathering of contributions can help investors purchase real estate properties such as:

  • Land

  • Commercial real estate

  • New construction

  • Renovation of existing structures

Creative Ideas and Individuals

The creative projects, inventions, and artist endeavors that can move forward because of crowdfunding are virtually endless. When individuals or companies invent or create products, practices, and/or artwork that could make a difference in the lives of customers or the public in general, they often turn to this nontraditional way to raise funds. Some of the projects that have been funded in this innovative manner include:

  • A bicycle manufacturer developed glow-in-the-dark bikes.

  • Musicians have launched their albums and musical tours.

  • Films have been made.

  • Clothing lines have been developed.

  • Museums have opened their doors.

  • Technological equipment has been invented.

Banks are great for borrowing money to buy homes or expand well-established businesses that have been around for years, but they are not the answer for nontraditional projects and new ventures. Luckily, there are alternative ways to generate financial backing, such as crowdfunding, to keep the world moving ahead in many areas.

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