This column is designed to give sound advice on entrepreneurship and business ownership to veteran entrepreneurs and their families.
What is crowdfunding?
By definition, crowdfunding is a way to fund a project or a new idea by a crowd of individuals contributing a small portion of the overall financial goal. Unlike a loan or investment, the individuals participating in a crowdfunding project do not necessarily receive a return on their investment. Crowdfunding is more of a “merits-based” reward system where the owner gives away something, like a sample of their product, to the people who funded them. Two examples of this are KickStarter and Indiegogo.
Crowdfunding is a great option for startups with a working, viable product. If your business is under a year old and has not produced much revenue, this might be a good funding option for you. Another added benefit to crowdfunding is the ability to showcase and market your business to a larger audience.
What is peer-to-peer lending?
Peer-to peer-lending is what we would call an “untraditional loan.” Rather than going through a bank or traditional financial institution for a loan, small business owners can have money lent to them by their “peers”, typically through an online marketplace.
Peer-to-peer lenders differ across the board. Most offer a fully-anonymized experience where neither party knows anything about the other—lenders are given insight into the financials and riskiness of lending to the borrower, but know nothing about their business. Other lenders offer a more social experience that combines elements of crowdfunding. These marketplaces allow the borrowers to pitch their businesses and explain why they need the funds, while also providing insight into their financials and credit worthiness.
Peer to peer lending is a great option for small businesses that have been in business for a year or longer and are producing revenue.
Mark L. Rockefeller is an entrepreneur, attorney and Veteran. He is the Co-Founder and CEO of StreetShares, an online marketplace where investors compete to provide shares of commercial loans to small businesses. StreetShares has been described as “Shark Tank meets eBay” for small business loans and has secured a commitment of $200 million to fund Veteran-owned businesses.
Have a question? Send them to Mark at email@example.com.
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