Pros And Disadvantages Of Crowdfunding

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Founders of a start-up business may look to private financing sources such as parents or friends. This can work well, but often arrangements with family and friends are informal and based purely on trust and verbal assurances. Any confusion about the agreement could damage personal relationships, so it is important that both parties are clear about what any investment will involve. For example, it may be in the form of equity financing in which the friend or relative receives an ownership interest in the business. However, these investments should be made with the same formality that would be used with outside investors. The advantages of financing from family and friends are more flexible than other lenders, offer loans without security or accept…show more content…
Usually conducted online, it allows a number of investors to individually invest smaller amounts of money into a business. The individual investments are then pooled together to help a business reach its funding target. Crowdfunding can be a good option for businesses that have struggled to raise finance through loans or other conventional funding methods, but should make sure the idea is protected before putting it on a crowdfunding website. For instance, the cool New York project featured on Goodnet raised $273,114 through crowdfunding to build a filtered, floating swimming pool in the middle of the river. The advantages of crowdfunding are it can help to raise awareness for new business, it can be a fast way to raise finance and there are no upfront fees and investors can track business progress and may help to promote brand through their networks. Nevertheless the disadvantages are if entrepreneur haven’t protected the business idea with a patent or copyright, someone may see it on a crowdfunding site and steal the concept and if the entrepreneur don’t reach the funding target, any finance that has been pledged will usually be returned to the

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