For many smaller food businesses, securing reliable funding can be extremely difficult. Most traditional financial institutions, such as banks and other lenders, are less likely to afford funding to those businesses deemed too risky. This can include smaller businesses, as well as those less-established enterprises trying to make their way in the commercial world.
However, over the past few years smaller businesses have been taking advantage of crowdfunding as a means of getting the money they need to cover most important business expenses. For food business entrepreneurs this can be an extremely vital resource when faced with a lack of financing, which can greatly inhibit future growth.
Understanding Crowdfunding
Some may be wondering what is crowdfunding? Real Estate crowd funding companies like The Prodigy Network for example specialize in this method of lending, and it has been gaining popularity over the last few years for businesses seeking alternate methods of funding. Crowdfunding can be useful for a variety of business types, from retail shops to an assortment of food businesses.
In essence, crowdfunding allows ordinary consumers to act as micro-lenders by providing small amounts of money to help a business thrive. This is accomplished through donations via the web, which allows for a more convenient method of receiving funding from interested parties all over the world. Crowdfunding is extremely popular for less conventional businesses, which typically have a harder time procuring funding.
Different Types of Crowdfunding Sources
In general, there are a few different types of crowdfunding methods that businesses should be aware of:
- Reward-Based – In this type, investments garner rewards for those providing funding by way of a product or service.
- Equity -Based – This method allows investors to receive a stake in a company as a result of their investment.
- Lending -Based – This model affords investors a periodic payout based on the amount of their investment.
When seeking a potential a site, it’s best to first do a bit of research to ensure it’s a good match for your individual business.
Why Crowdfunding Works for Food Businesses
Food businesses in particular are heavily reliant on consumer input to make sure they are best meeting the needs of all customers. This means that consumers can have a keen insight on what works and what doesn’t when it comes to a specific business model. Crowdfunding offers consumers the ability to support businesses they love, ensuring that such businesses remain viable entities in the commercial world.
Additionally, securing funding for businesses valued below $10 million can be very difficult, especially during times of economic strife. Past lending venues prefer to invest in those businesses that offer guaranteed returns, and as a result view smaller businesses a risky proposition when it comes to investing. The same can be said for newer food businesses, or those that offer a less-common business model. Fortunately, crowdfunding ably solves this problem by allowing businesses to connect to consumers interested in their product, which results in the necessary financial support.
Funding Well-Suited to Food Entrepreneurs
Almost all businesses will require funding at some point, and finding the right funding for your particular businesses needs can make all the difference between success and failure. For food entrepreneurs, crowdfunding offers a reliable alternative that can afford financial assistance when you need it most.
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