Crowdfunding (also known as crowd financing or crowd-sourced capital) involves a number of people each investing, lending or contributing smaller amounts of money to your business or idea. This money will then be pooled to reach your funding target.
Your idea will usually be showcased through a crowdfunding website.
Advantages of crowdfunding include:
- it provides an alternative to funding from conventional means, e.g. bank loan
- you can raise finance relatively quickly, often without upfront fees
- it can raise awareness of your new business
Disadvantages of crowdfunding include:
- your idea could be copied if you haven’t protected it with a patent or copyright
- any money you raise will normally be returned to investors or contributors if you don’t reach your funding target
- crowdfunding is mostly unregulated (but from 1 April 2014, loan-based and investment-based crowdfunding will be regulated by the Financial Conduct Authority)
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