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Could crowdfunding be your step towards further investment?

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Whether your business is refused a bank loan or you want to try an alternative method of fund raising, crowdfunding is picking up the pace and becoming a viable funding option for many businesses.

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Crowdfunding has secured Sourced Market two thirds of their funding in two weeks
Crowdfunding has secured Sourced Market two thirds of their funding in two weeks
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Is crowd funding the way forward and could it be the start of something amazing? #crowdfunding #career

Artisan food and drink retailer, Sourced Market has recently secured over two thirds of its investment target in order to expand and enter the next phase of its growth plan.

 

All this has happened through crowdfunding.

 

In three weeks, Sourced Market raised £636,500 through a crowdfunding website called Crowdcube and has until December 19 to source the remainder of its money.

 

But what is crowd funding and is it something farmers could use?

 

What is crowd funding?

Crowdfunding offers small businesses the opportunity to apply directly to investors in order to build up enough funding for their chosen project. This means bypassing banks who may turn down a funding application for a whole host of reasons.

 

It also means anyone can invest into a new business or expansion, whether they want to give £5, or £50,000. However, some crowdfunding exercises, such as Source Market, require a minimum investment; in this case it is £500.

 

Crowdfunding validates your idea as it gives you the confidence to know people believe in your project and are willing to invest their money to help you succeed.

 

There are three different forms of crowdfunding which alter the investor’s position within the business equation.

 

Donation crowdfunding

 

As the name suggestions – investment is taken as a donation with no expectation of reward.

 

Debt crowdfunding

 

Investors receive their money back with interest, similar to how a bank would lend money.

 

Equity crowdfunding

 

People invest their money in exchange for equity, most commonly a share in the business or project.

 

‘Understand things may not go to plan’

Ben O’Brien, founder of Sourced Market, said: "The support that has come in from our existing networking and new investors has blown us away and we now feel confident of meeting our target.

 

He said a key factor to understand in crowd funding is to ’understand things may not always go to plan, but it is important to remember that any hurdles you manage to overcome will leave you better prepared for future challenges’.

 

 


Ben O'Brien's top tips for small businesses when thinking about crowd funding

  • “If you want to be taken seriously in the crowdfunding game, you need to know your financials inside and out.” – Potential investors will naturally take an interest in your figures and if you do not have a good grasp of these, they are likely to lose confidence in your business plan.
  • “You need to know what sets you apart from your competitors” – Smaller businesses can react more quickly and bring ideas to fruition much faster than bigger, more established businesses.
  • “An entrepreneur looking to secure investment cannot be afraid of taking risks.” – Whether it is trying out new ideas or investing some of your own money, it can really pay off in the long run.
  • “You will be in a stronger position when pitching to prospective investors if you are able to get the business up and running on a small scale using your own capital.” – Whether that is using your savings, taking out a loan or borrowing money from friends and family, investors will view you as a worthy contender if you can demonstrate you have a viable concept.
  • “Get out there and talk to as many people as possible about your business plan.” - By pitching to as many of your chosen audience as you can get in front of, the word will spread and you’ll have more and more people investing their interest, and hopefully their money, in your mission.
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