Crowdfunding or A Small-Business Loan: What’s Best For Your Company?

When your business is small or just getting started it can seem like a major impossibility to get your hands on quick cash. Heck, in today’s uncertain economy it can be hard for established companies to get their hands on quick cash. Well, certain establishments and investors have recognized how difficult it is for certain businesses to procure loans and they are taking advantage of this. There are now more than 44 different types of business financing options available for small business owners. And, two of the most popular are the traditional small business loan and crowdfunding, but which best suits your company?

Know How Crowdfunding Works

Crowdfunding really is a simple concept when it comes right down to it. It basically involves getting funds for a project or business venture through a series of small donations or pledges. These donations or pledges will usually come from multiple individuals or investors, but in return, you will usually have to promise them equity in your business or new product. This type of loan can be extremely handy when you are trying to release a new product because it already gives you market validation without sinking money into the project. In addition to this, it saves you from fundraising. You also get to bypass credit checks and high-interest rates. The only downside is that you are going to have to share your profit.

Know How Small Business Loans Work

A small business loan works in the same fundamental way that a traditional loan works. You find a lender and they give you capital that you can spend throughout your company in any manner that you choose. However, you will be required to pay back this loan with interest. Interest rates will vary based on your overall credit score and if your credit score is non-existent or poor you might not even be able to secure the loan. Just keep in mind that when you are applying for a small business loan you don’t have to go through a traditional bank. There are other lending options available. In fact, in some cases lenders are able to fund loans within hours – reference. With little paperwork and a guaranteed fast return rate, you can get started with your conquests right away.

Do You Have The Time?

Crowdfunding might sound like the more sound solution, but the truth of the matter is that you have to have a lot of time on hand to fund this kind of project. It is going to take months if not years to draw out different potential lenders and investors. Then you have to work out how much they are going to make when the product comes to fruition. If your small business is desperately in need of cash for expansion or you just need the extra cash to cover your day-to-day expenses, you aren’t going to have this kind of time to waste.

Do You Have A Sexy Project?

In order to take of crowdfunding, you will also need an extremely sexy and marketable project. You need something that reaches out and grabs the attention of investors. These guys are probably presented with hundreds of different projects on a weekly basis.