When considering how to expand their business or pursue a new opportunity, entrepreneurs often ask how they can get access to capital. For small businesses, access to capital can be almost as challenging and time-consuming as actually starting the business itself. In fact, surveys show that about 90 percent of start-up companies fail because they cannot find the right investors to fund their businesses. But thanks to advancements in technology, and in particular blockchain, there are new and innovative ways that businesses can source capital from investors more quickly and at a lower cost than ever before.
Crowdfunding is the practice of funding a business or project through the financial contributions of a large number of individuals. Crowdfunding campaigns can be found in almost every industry and can be done both online and offline.Typically, crowdfunding campaigns involve a company creating a campaign and sharing it with their network of friends, family and business associates. They can then ask these people to donate money towards their goal of raising funds. The campaign will then reach out to these people individually and ask them to contribute to their cause. When a goal is reached, the campaign is successful and the company receives the money.
Equity Crowdfunding is a type of crowdfunding where entrepreneurs raise money from investors in exchange for equity in their company. Typically, equity crowdfunding campaigns allow investors to purchase shares in the company at a set price. For example, if a company wants to raise $1 million, it may set the price of each share at $10. Investors who want to purchase shares will buy these shares from the company. Once the money is collected, the company will issue shares to the investors. When the company grows and makes more money, then the investors will receive their profits as a reward for their investment.
Similar to crowdfunding, knowledge sharing platforms allow entrepreneurs to reach out to investors, receive funding and then use their money to fund their business. Unlike crowdfunding, knowledge sharing platforms do not require any money to be invested. Instead, the company will share their knowledge, tips, and resources with investors who are interested in learning more about a particular topic.Investors who take advantage of knowledge sharing platforms are able to gain valuable information that can be used to grow their own businesses. They can also make connections with other investors who can help them in the future.
Asset-based financing (also known as debt financing) is when a business takes out a loan from an investor (known as the lender) who has no equity in the company. In exchange for the loan, the business provides the lender with collateral (or an asset) that they own. The most common collateral used in an asset-based financing transaction is inventory or accounts receivable.Investors in asset-based financing transactions provide the borrower with the cash they need to grow their business. The lender receives a return on their investment through the interest that they charge on the loan. If the collateral isn’t enough to cover the loan, the borrower will have to repay the loan with interest.
Co-Working Space financing is a type of financing where businesses provide their co-working space as collateral. In exchange for a lower interest rate, the business receives cash to renovate their space and increase their revenue.Co-Working spaces are common in major cities where entrepreneurs can work alongside like-minded individuals. Financing these spaces is a great way to increase revenue. If a business fails to pay back the loan, then the lender can take control of the space.
When considering how to expand their business or pursue a new opportunity, entrepreneurs often ask how they can get access to capital. For small businesses, access to capital can be almost as challenging and time-consuming as actually starting the business itself. In fact, surveys show that about 90 percent of start-up companies fail because they cannot find the right investors to fund their businesses. But thanks to advancements in technology, and in particular blockchain, there are new and innovative ways that businesses can source capital from investors more quickly and at a lower cost than ever before.