Crowd Funding your Business to Success

Crowdsourcing refers to getting funding or work from many people. This is very popular online.  One good example of such an idea is Zidisha . This is an online micro lending community that gives loans to persons in developing countries so as to start businesses.

Zidisha is the first online micro lending community that directly connects lenders and entrepreneurs — no matter the distance or disparity between them. We bypass expensive local banks and intermediaries that charge sky-high interest rates and offer a person-to-person platform that lets lenders and entrepreneurs communicate openly and instantly.

More than charity

Developing countries are home to unbelievable amounts of energy, ingenuity, and ambition. And because millions of young adults in developing countries are now online, they no longer need charities or aid organizations to tell their remarkable stories.

But while they may have access to online social connectivity, they don’t have access to the resources needed to live up to all that ambition. Formal jobs are scarce. Self-employed workers make meager earnings and lack the capital needed to grow their businesses. Local banks rarely help them out.

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As banks and other financial institutions turn down loan applications for businesses, crowd funding is the force taking over. There are various benefits to be enjoyed by funding your business this way. It is better than going to a loan shark who will make you pay through your nose.

Here are 10 great benefits that crowd funding offers an entrepreneur.

1) It provides access to capital.

At an early stage, an entrepreneur may think that outside of their own network they can only raise capital from accredited investors, venture capitalists, and banks. This isn’t true.

Crowd funding is a great alternative way to fund a venture, and it can be done without giving up equity or accumulating debt. Rewards-based crowd funding platforms allow entrepreneurs to raise funds from the community in exchange for simply giving their tangible products or other relative gifts.

2) It hedges risk.

Starting up a company is a very risky and challenging journey. Besides finding sufficient funding, there are always expenses that are impossible to forecast, challenges in market validation, and other people who want a piece of your venture in order to help get it off the ground.

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Now that you know that you can actually get business funding from crowd funding it is time to take the next step. You will not automatically get the funds without pitching. You will need to have a good strategy but the best advice is to keep it simple. Here are some tips to help you prepare.

How to prepare your business for crowd funding

While the JOBS Act should be implemented soon, here are a few things you can do to get ahead while you wait.

  • Incorporate your business – It’s possible that only C corporations will be in a position to take advantage of crowd funding opportunities. This is because S corporations have a 100-shareholder limit, effectively precluding the use of crowd funding. Talk to a lawyer or a local small business organization like your SBA District Office or SCORE to help you explore and select the right entity.
  • Start writing or refining your business plan – This will help you determine the amounts of financing you are looking to raise. It can also help you outline your business expectations and alleviate any concerns potential investors may have about how valid your venture is and how serious you are about it. SBA’s Build a Business Plan tool can help you walk through these steps. It’s an easy-to-use interactive online template that you can work on, save anytime and download when you’re finished.
  • Get your accounting records in order – Part of the new JOBS Act will require entrepreneurs to follow SEC-compliant guidelines in regard to providing accurate, transparent and up-to-date financial statements and due diligence reports. Balance sheets, cash flow statements, financial projects and more will help you build your credibility with potential investors and are required before you even launch your fundraising campaign, so be prepared.

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