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Loans For Freelance Businesses: Your 13 Best Options

loans for freelancers

Freelancer. The very word evokes freedom (and lances). If you’re a self-employed freelancer, I’m sure I don’t have to lecture you about the perks and drawbacks of running a freelance business. You probably enjoy the independence — the feeling of freedom that comes from choosing your own work assignments and making your own financial choices without a boss looking over your shoulder.

However, you’re probably less than thrilled with the difficulty of getting a small business loan. It’s not easy for any business to qualify for a loan from a big bank these days, but it’s all the more difficult for a freelance business. Most banks see sole proprietors as a lending risk, as you are personally liable for all losses and debts your freelance business incurs. Plus, your entire business is dependent on your good health and ability to work.

For these and other reasons, many freelancers would benefit from exploring alternate means of financing. Thankfully, many different types of financing are available from online lenders. When compared with the big banks, online lenders tend to be somewhat more relaxed in their eligibility requirements. But while you may face fewer hurdles regarding your credit score, annual revenue, and time in business, online lenders usually charge higher interest rates than bank loans. That’s the trade-off you accept in exchange for the convenience and less stringent eligibility barriers of online lenders.

Let’s explore the main categories of financing available to freelance businesses and the top reputable lenders that offer loans within each category. Note that many online lenders offer more than one type of loan, so if I list a lender under a particular loan category, that doesn’t mean they don’t offer other loan products!

Personal Loans

Freelancers will find it difficult to get a business loan, whether from a bank or an online lender. In fact, this goes for most young businesses, freelance or not. Lenders of business loans closely examine your business’s revenue, net income, debt-to-asset ratio, business credit, and collateral, and only the most profitable and well-established businesses tend to qualify.

Personal loans are different. With a personal loan, the lender assesses your credit-worthiness, not that of your freelance business, though you will have to disclose the fact that the loan will go towards supporting your freelance business. However, whether or not you qualify for a personal loan will mainly depend on your personal credit score, credit history, source of income, and debt-to-income ratio. Borrowing amounts are also less than with business loans. Typically, the maximum borrowing amount for personal loans is $35K to $50K.

I’m going to walk you through some of the top online vendors of personal loans. But first, here are some links to articles we’ve done on using personal loans for business expenses.

  • The Merchant’s Guide To Personal Loans For Business
  • Top Personal Loans For Business Compared

Upstart

Borrower requirements:
• Must have a personal credit score of 620 or higher.
• No time in business or revenue requirements.
Visit the Upstart website
Read our Upstart review

Upstart is a great personal lender for the freelancer whose credit might not be stellar. In contrast to the personal lenders who scrutinize your credit score/history and finances to the exclusion of all else, Upstart takes a broader view of your earning potential by considering factors such as your employment history and education. You’ll likely still need decent credit to qualify — your credit score must be 620 or higher — but it’s good to see a lender whose conception of credit-worthiness isn’t quite so exclusionary.

You can borrow a maximum of $50K (in most states) from Upstart — more than with many competitors. As far as Upstart’s terms and fees go, the APR ranges from 7.73% to 29.99%, term lengths are for three or five years, and there’s an origination fee of up to 8%.

Overall, Upstart is a top-rated personal lender with a relatively progressive lending ethos. Check out our full Upstart review and Upstart’s website using the links above.

Lending Club

lending club logo
Borrower requirements:
• Must have a personal credit score of 600 or higher.
• No time in business or revenue requirements.
Visit the Lending Club website
Read our Lending Club review

Founded in 2006, Lending Club was one of the first non-bank online lenders to come upon the scene. They remain one of the most popular online lenders out there, as their rates are competitive and their loans are relatively easy to qualify for. What’s not to like?

For personal loans, Lending Club’s maximum borrowing amount is $40K. The APR ranges from 5.98% to 35.89%, term lengths are for three or five years, and there is an origination fee of 1-6%.

Lending Club has lent money to countless people in its decade-plus in business. To learn more about Lending Club, links to the company’s website and our Lending Club review are posted above.

Prosper

Borrower requirements:
• Must have a personal credit score of 640 or above.
• No time in business or revenue requirements.
Visit the Prosper website
Read our Prosper review

Another pioneer in the online lending industry is Prosper, founded in 2005. As with the previous lenders listed, Prosper offers personal loans you can put towards your freelance business.

Prosper offers fixed-term loans with lengths of three or five years. The company’s APRs range from 5.99% to 35.99%, which includes a closing fee of 0.5% to 4.95%, and the maximum borrowing amount is $35K. You will need a credit score of at least 640, however.

Check out our Prosper review at the link above if you’re intrigued. Afterward, visit Prosper’s website and see what kind of rates you can get compared to the other personal lenders I’ve mentioned.

SoFi

sofi logo
Borrower requirements:
• Must have a personal credit score of 660 or above.
• No time in business or revenue requirements.
Visit the SoFi website
Read our SoFi review

SoFi describes itself as “a new kind of finance company.” Short for “social finance,” SoFi offers free career coaching and financial advising to all members. SoFi’s loans are quite flexible in comparison to the other personal lenders listed here.

SoFi’s maximum borrowing amount of $100K is remarkably high for a personal loan vendor, and term lengths run from three, five, or even seven years. With fixed APRs from 5.49% to 13.49% and no origination fees, SoFi’s flexible personal loans are quite competitively priced indeed. On the other hand, SoFi’s borrower requirements are a bit more stringent than those of the other personal lenders listed here, plus the loans are slower in coming — after you’re approved, it can take up to 30 days for you to get your funds.

Visit the above links to read our SoFi review and check out their website to see what they can offer you. Remember, with lenders, as with life, it pays to comparison shop!

Lines Of Credit

Many online lenders include lines of credit as part of their product offerings. If you own a credit card, you’ll understand the concept of a line of credit loan. You’ll get access to a certain amount of funds, and you can draw upon these funds at any time while paying interest only on what you actually borrow.

Lines of credit actually tend to be less expensive than credit cards. Moreover, the repayment terms usually differ.

I’m going to list some lenders offering business lines of credit, but first, here’s further information about this common loan type.

  • The Merchant’s Guide To Line Of Credit Loans

StreetShares

Borrower requirements:
• Must be in business at least 12 months with a revenue of $25,000 per year (sometimes StreetShares will make exceptions for high-earning businesses at least 6 months old).
• Must have a personal credit score of 620 or above.
Visit the StreetShares website
Read our StreetShares review

StreetShares is an online lender offering lines of credit along with traditional installment loans and contract financing. While StreetShares was founded by veterans and takes pride in catering to the particular needs of veteran-owned business, any business owner can use StreetShares to take out a loan — including freelancers!

Take note of the requirements listed above, as there are revenue/time-in-business requirements to be met. As for the lines of credit themselves, the maximum amount you can borrow is $100K, but the amount of the line of credit you can actually get will depend on your revenue. The more you earn, the more you can borrow. All things considered, StreetShares’s borrower requirements for a business line of credit are not terribly onerous.

The draw term length for a StreetShares line of credit is 3 to 36 months, the APR range is 7% – 39.99%, and there is a draw fee of 2.95% each time you draw from your line.

BlueVine

bluevine logo
Line of credit borrower requirements:
• Must be in business at least 6 months with a revenue of $10,000 per month.
• Must have a personal credit score of 600 or above.
• Lines of credit are not available in all states. See full review for details.
Visit the BlueVine website
Read our BlueVine review

Founded in 2013, BlueVine is an online lender that offers both business lines of credit and invoice factoring (more on that later). Let’s examine their lines of credit.

While the amount you can borrow will depend on your revenue, BlueVine’s maximum borrowing amount is $200K. Term lengths are for 6 or 12 months. APRs range from 15% to 78%, and there is a draw fee of 1.5%.

Along with the borrower requirements listed above, note that BlueVine lines of credit are not available in all 50 states.

Invoice Factoring

Invoice factoring is a way for B2B businesses to maintain a consistent cash flow by selling their invoices, at a discount, to factoring companies in exchange for cash upfront. It’s a way to even out your cash flow when you have clients who take their sweet time paying their invoices.

Invoice factoring has some complexities to it, so if you’re thinking it makes sense for your freelance business, I highly recommend reading our explainer article on the subject.

  • A Basic Introduction To Invoice Factoring

Fundbox

Invoice financing borrower requirements:
• No specific time in business, revenue, or credit score requirements.
Visit the Fundbox website
Read our Fundbox review

Founded in 2013, FundBox offers an invoice financing product called FundBox Credit. Invoice financing is very similar to invoice factoring — the difference to the borrower is that you must make payments on your loan on a weekly basis, not whenever your customer pays their invoice.

Fundbox Credit will hold great appeal to many freelancers due to its relaxed eligibility requirements — you don’t have to meet any time in business, revenue, or credit score threshold! However, you are required to have been using compatible accounting or invoicing software for at least three months, or a compatible bank account for at least six. See our Fundbox review for details.

Fundbox Credit lines are offered up to $100K, the term lengths are 12 or 24 weeks, and there is an advance fee of 0.4% to 0.7% per week when you make your weekly payments.

Riviera Finance

Invoice factoring borrower requirements:
• No specific time in business, revenue, or credit score requirements.
• Best for B2B and B2G businesses.
Visit the Riviera Finance website
Read our Riviera Finance review

Founded all the way back in 1969, Riviera Finance is no newcomer when it comes to invoice factoring. Riviera Finance offers non-recourse factoring, which means you won’t have to repurchase an invoice if a customer goes bankrupt.

While Riviera Finance is a real-world meatspace lender with 20 offices throughout the U.S. and Canada, you can nonetheless apply online to use their services.

Riviera Finance offers contracts that run anywhere from month-to-month to 12 months long, and the credit faculty size runs from $5K a month to a whopping $2 million per month! Check out the links above to learn more about Riviera Finance.

P2P Loans

P2P (peer-to-peer) lending is a lending model employed by many online lenders. Instead of borrowing from a central banking entity, your loan application is instead approved by a banking platform to go live for online bidding, where everyday investors who like the cut of your business’s jib can invest in your business.

Small-time investors can be risk-averse, so freelance businesses with bad credit may have difficulty securing the needed financing. Nonetheless, you’re still more likely to be approved for a P2P loan than a bank loan.

Many online lenders of personal loans and other kinds of loans are P2P lenders. In fact, of the lenders I’ve mentioned thus far, Upstart, Lending Club, Prosper, and StreetShares are all P2P lenders!

Microloans

Microloans are small loans — under $35K but typically in the range of $5K to $10K — offered at low interest rates. Microlenders typically focus on marginalized groups that face difficulties getting a loan elsewhere. As such, they are a solid option for women and minority freelancers seeking smaller loans, though any freelancer can take advantage of the generous terms offered by microlenders.

Kiva U.S.

kiva logo
Borrower requirements:
• No specific time in business, revenue, or credit score requirements.
Visit the Kiva U.S. website
Read our Kiva U.S. review

Kiva U.S. is a remarkable microlender in that not only are there no revenue, credit score, or time-in-business requirements to meet in order to qualify, but Kiva U.S. loans carry no interest or fees whatsoever! Pretty cool, eh?

With Kiva U.S., the only requirement to get a loan is that you run a business and that you put your funding towards your business. You can take out a Kiva U.S. loan for as much as $10K or as little as $25. Yes, that’s 25 dollars. Your APR will be a big fat 0%. Term lengths are for 6 to 36 months.

Does this sound too good to be true? Well, keep in mind that Kiva’s application process is significantly longer than that of other online lenders. The process can take up to two months. For more information, check out our Kiva U.S. review and Kiva U.S.’s website at the links above.

Accion

Borrower requirements:
• Requirements vary based on location — see full review for details.
Visit the Accion website
Read our Accion review

Accion is a nonprofit microlender that also happens to be one of our highest-rated lenders, period. Their reputation, customer service, and financial education programs are all top-notch. While Accion’s loans aren’t “free” like those of Kiva U.S., Accion is an excellent funding option for the freelance business owner.

Borrower requirements vary by location, so you’ll need to visit Accion’s site at the link above to see just what is required of you to get an Accion loan. Credit score requirements vary from 550 to 575, and you must demonstrate that you have sufficient cash flow to repay the loan.

While Accion’s loan offerings vary by U.S. state, you can borrow as little as $300 to as much as $1 million (and yes, it would be a stretch to call that a microloan!). APRs generally range from 7% to 34%, and you may need to put up specific collateral in some situations. Check out our full Accion review above for more details, then head to Accion’s website to see what specific offerings are available in your area.

Crowdfunding

Crowdfunding is an excellent way for freelancers in the creative industries to get funded by those who enjoy their work. Note that while P2P lending is sometimes referred to as debt crowdfunding, the kind of crowdfunding I’m talking about is rewards crowdfunding in which backers support you financially and get exclusive access to your work in return. It’s not technically lending, as you don’t have to pay back your backers!

Of course, running a crowdfunding campaign will require much more of your time and energy than a loan application, so know what you’re getting into. Below is a basic primer on running a crowdfunding campaign. (Note that I mention debt and equity crowdfunding in that article — I’m not focusing on those here.)

  • Crowdfunding For Startups: 8 Tips You Should Know Before Launching

Kickstarter

Campaign requirements:
• Must offer rewards to your backers.
Visit the Kickstarter website
Read our Kickstarter review

Founded in 2009, Kickstarter has become synonymous with crowdfunding. With over $3.6 billion in funding sent to creators and entrepreneurs, Kickstarter is the largest commercially-focused crowdfunding site in existence. If your freelance business is devoted to making creative works, Kickstarter is a great way to raise money for a big project.

Kickstarter requires all crowdfunding campaigns to create something that can be shared with others. There’s no limit to the amount of money you can raise on the platform. Your funding campaign can last for up to 60 days (though Kickstarter recommends 30-day campaigns), and Kickstarter will take 5% of what you raise as a platform fee. An additional 3% + $0.20 per pledge goes to the payment processor.

One thing to keep in mind with Kickstarter is that in order to collect the funds at the end of your campaign period, you must reach or surpass your funding goal. Fail to reach your funding goal, and you get nothing — no soup for you.

Check out our Kickstarter review at the link above if you’re interested, then cruise on over to Kickstarter’s website.

Indiegogo

indiegogo
Campaign requirements:
• Offering rewards to your backers is strongly recommended.
Visit the Indiegogo website
Read our Indiegogo review

Indiegogo is a crowdfunding platform that caters to a similar audience as Kickstarter — creative and tech projects and the backers who love them. Initially founded as a funding engine for independent films, Indiegogo soon expanded their mission, offering crowdfunding for a wide variety of commercial purposes. However, Indiegogo differs from Kickstarter in a few key ways.

While Kickstarter pre-screens campaigns for suitability before letting them campaign, Indiegogo serves all comers — just sign up and get started (though this doesn’t mean there are no rules to abide by). Another difference is that you’re not actually required to offer rewards to your backers. However, as you can imagine, you’re probably not going to raise much money if you offer people nothing, so I don’t recommend doing that!

Another difference with Kickstarter is that when you run an Indiegogo campaign, you can choose to employ the keep-what-you-raise crowdfunding model in which you keep whatever you raise at the conclusion of your campaign regardless of whether you’ve met your funding goal. Indiegogo is more flexible in its terms than Kickstarter.

Fees are largely the same as those of Kickstarter — there’s a 5% platform fee and a 3-5% per pledge payment processing fee. Check out the links above if you’re interested in Indiegogo’s crowdfunding model.

Patreon

patreon
Campaign requirements:
• Must offer rewards to your backers.
• Funding is ongoing on a per-month or per-creation basis.
Visit the Patreon website
Read our Patreon review

Patreon differs fundamentally from Kickstarter and Indiegogo. Instead of campaigning for a fixed period of time for a single project, Patreon lets you crowdfund on an ongoing basis. You can just keep creating on your own time schedule. Your patrons (assuming you attract some!) sign up to support you either on a monthly or per-creation basis. It’s a great way for freelancers to monetize their creative output indefinitely, not just for one specific project.

Patreon is generally more relaxed in the sort of campaigns it allows than Kickstarter or Indiegogo — you can probably get away with producing “edgier” content than with the other two. As for fees, Patreon takes 5% off the top, with payment processing fees coming to approximately 5% as well.

Final Thoughts

Life’s not easy for the freelancer. With all the other challenges you face, securing the funding you need can seem like an insurmountable hurdle. Thankfully, there are many viable funding options out there for the freelance business owner determined to make it work.

Be sure to explore multiple options in your funding quest so you can weigh each option on its relative merits. Now go forth and let your freelance flag fly!

The post Loans For Freelance Businesses: Your 13 Best Options appeared first on Merchant Maverick.

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How To Use GoFundMe To Fund A Business In 8 Steps

go fund me for business start up

With over $5 billion raised on the platform since its inception in 2010, GoFundMe has a reputation for helping to cover the costs of personal emergencies in a world where most of us are just one missed paycheck away from ruin. But while the company has become synonymous with charitable crowdfunding, you might not realize that GoFundMe can be used to fund a business as well. Want proof? Here are the categories you can choose from when creating your GoFundMe campaign:

 

go fund me for business

Now, don’t get me wrong: If your entrepreneurial venture is a high-tech startup with exponential growth potential, or if you’re creating the next tabletop gaming sensation, you’re going to be better off going with a more commercially-oriented crowdfunding platform like Kickstarter (see our review) or Indiegogo (see our review), or perhaps one of the new equity crowdfunding sites that have popped up in recent years.

However, for the right kind of startup business — preferably one with a local/community focus and with a compelling story to tell about overcoming adversity — GoFundMe is an attractive fundraising option. One big reason? GoFundMe charges no platform fee to individual campaigns launched from the US, UK, and Canada. The typical crowdfunding site takes 5% of what you raise.

I’ll give three real-world examples of people using GoFundMe to fund a business and finding success.

  • Two Detroit students raised $3,000 to fund their socially-conscious waffle cookie company
  • Owners of a San Francisco restaurant raised $50K to get out of debt
  • A veteran raised $2,000 to start his own motorcycle repair shop

Read on for the eight steps you should follow to get money from GoFundMe to start your own business.

1) Make Sure Your Business Is Right For GoFundMe

Before you go about using GoFundMe to start a business, consider whether your startup is a good fit for GoFundMe. Many of the startups currently using crowdfunding to great effect are in industries that thrive on platforms like the aforementioned Kickstarter: makers of apps, gadgets, and games who typically don’t have an offline presence in the form of a restaurant or shop. Likewise, Patreon (see our review) has become a leading crowdfunder for podcasters, musicians, graphic artists, and other creatives whose work is easily disseminated online.

Crowdfunding with GoFundMe is a different matter, however. Donors tend to contribute to GoFundMe campaigns not to get in on the latest tech trend or trendy tabletop game, but to make a positive difference in the life of people in need or to benefit their community as a whole. Look at the sort of businesses that have had successful GoFundMe campaigns and you’ll note that they typically feature some combination of a) a business that has a positive impact on public life in a community and b) an entrepreneur/business owner with either a sympathetic and compelling personal story to tell or a mission related to charity or social justice.

If neither a) nor b) applies to you and your business, you’d be better off seeking funding from one of the other crowdfunding outfits I’ve mentioned. If at least one of the two does apply to your efforts, you stand a decent shot at making GoFundMe work for your business.

go fund me for business

2) Develop A Business Plan & A Realistic Funding Goal

Have a business plan ready before you start publicly campaigning for money. In particular, make sure you set a funding goal that you expect to actually be able to meet. Define exactly what it is that you plan to do with the money you expect to raise so that in the event you reach your funding goal, you know what to do next.

Of course, all the best-laid plans on Earth won’t help you if you don’t actually raise any money. One way to increase your chances of crowdfunding success is to offer cool rewards to people who donate to your campaign.

3) Offer Multiple Reward Tiers

Remember when I said that GoFundMe donors are motivated mainly by the desire to do good? This may be the case, but you’re still competing for the limited attention of donors with all the other campaigns listed on the site. This is when rewards come into play.

With GoFundMe, as with Kickstarter and many other crowdfunders, you can offer multiple levels of rewards to those who contribute to your campaign. This means that you can offer increasingly higher-value rewards to people who donate larger amounts of money. My advice would be to take advantage of this crowdfunding feature and offer multiple reward tiers to your would-be donors. Give people a reason to feel invested in your success!

While branded trinkets and t-shirts might draw some people in, rewards that give people a taste of your product or service are even better. Offer discounts, coupons and/or gift cards for whatever you have to offer. Get people in the habit of frequenting your business and they’ll be more likely to give you their business on an ongoing basis.

4) Refine Your Campaign Pitch

When creating your GoFundMe campaign page, you’ll obviously want to make it as appealing as possible.

  • Post A Fun Campaign Video: Keep it to around two minutes so you don’t lose viewers’ fickle attention, but don’t be afraid to show a personal touch, as people prefer authenticity and humor to slick sales pitches. You should at least allude to the personal challenges you’ve faced in growing your business. After all, this is GoFundMe, where tugging at the ol’ heartstrings is expected.
  • Make Your GoFundMe Campaign Page As Attractive As Possible: Use high-resolution images to promote your campaign. Preferably images that feature both you and your place of business. Remember: the personal touch is key.
  • Write A Descriptive Title: Try to summarize what your campaign is all about with one phrase. Don’t just write “Business Needs Help” — that doesn’t tell anyone anything or capture their interest. A good, catchy title can help distinguish your campaign from the thousands of others like it!

5) Seek Support From Friends & Family Before Launch

Not to diminish the importance of marketing your campaign to the public at large, but your most important source of support is likely to be your personal network: friends, family, co-workers, acquaintances, etc. Not only are they likely to contribute a significant proportion of what you raise, but it’s essential to secure their support before your campaign goes public. That way, when you launch your campaign, strangers who come across it won’t see “$0” as the amount raised. Success breeds success, and it’s easier to attract public support when you’ve already secured a decent chunk of funding.

You can have family members donate anonymously if you don’t want people knowing how much of your support comes from relatives!

6) Market Your Campaign Via Social Media & Email

To build buzz around your GoFundMe campaign, you’ll need to market it on your social media channels. Use Facebook, Twitter, Instagram and the like to spread the word about your story and your campaign. If you can, try to collect the email addresses of those interested in your campaign in order to build a mailing list in which you can give updates on your business’s progress and whatever other behind-the-scenes material you like. You can use services like MailChimp (see our review) to keep your followers updated with attractive template-based emails in which you can detail your progress.

Try to develop some press contacts as well. This way, when you’re ready to launch, you can alert them ahead of time.

7) Keep Everybody Updated After Your Campaign Launches

There’s a reason it’s called a campaign — you have to work hard to keep the contributions flowing! The uncomfortable truth is that most crowdfunding campaigns, whether they be for business or personal causes, don’t reach their funding goals. If you want to beat the odds, a compelling story and a nifty video won’t be enough. You’ll need to work on your campaign continuously as if it were your job.

Once your campaign is in full swing, keep everyone informed with frequent updates. Don’t just post updates to your GoFundMe page — make sure to send out updates through all your social media channels as well. Go ahead and get personal with your updates. Don’t just rattle off a list of statistics. Document your continuing personal involvement in your campaign for business funding. Be sure to respond to anyone with questions about what you’re doing, both on your GoFundMe page and on social media.

8) Stay Engaged With Your Backers Post-Campaign

Let’s say you overcome your challenges and meet your funding goal. Fantastic! Now, what are you going to do with the contacts you’ve made, the followers you’ve attracted, and the mailing list you’ve started? If you want your business to thrive, you won’t just let them drift away.

Consider an email drip campaign to keep your contacts appraised of your latest doings and to offer special promotions. Stay active on the social media channels you used to such great effect during your campaign. Maintain the relationships you developed with your first customers, as these people will be your most important evangelists, spreading the good word about your business and the friendly, personable owner who treated them so nicely.

In this lonely, atomized world we unconscionably created, people long to experience community. Provide them with one, and they will reward you.

Final Thoughts

Crowdfunding is hard. As I mentioned at the start of this article, most crowdfunding campaigns fail. There’s a reason why crowdfunding hasn’t solved the problems of startup undercapitalization or bankruptcy-inducing medical expenses. However, if you prepare beforehand, build a community of supporters, and approach the task like a job, you’ll greatly increase your chances of success when using GoFundMe to start a business.

Check out the links below to learn more about GoFundMe.

Read our full GoFundMe review

Visit the GoFundMe website

The post How To Use GoFundMe To Fund A Business In 8 Steps appeared first on Merchant Maverick.

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10 Great Real Estate Crowdfunding Platforms For Businesses

real estate crowdfunding platforms

When crowdfunding rose on its initial wave of popularity, it was strictly a means of raising money for personal causes and makers of board games and household gadgets and whatnot. That all changed with the passage of the JOBS Act of 2012. The JOBS Act was sold as a response to the lack of capital available to startups in the wake of the Great Recession. It legalized the crowdfunding of securities so that campaigners could raise money from investors in a public campaign.

From there, it was natural that real estate developers would turn to crowdfunding as a new way of attracting investment. Six years after the passage of the JOBS Act, crowdfunding real estate has become quite the growth industry, with countless real estate crowdfunding sites popping up, offering equity and/or debt crowdfunding deals to accredited investors, and, in many cases, non-accredited investors as well.

With the crowdfunding industry projected to be worth in excess of $300 billion by the year 2025, there’s never been a better time for those in the real estate business to consider crowdfunding as a means of reaching investors who would otherwise be inaccessible. Here are 10 of the most popular and well-regarded real estate crowdfunding platforms out there.

1) PeerStreetcrowdfunding real estate

Self-described as a “marketplace lending platform for real estate debt,” PeerStreet was founded in 2013 by real estate attorney Brew Johnson and former Google executive Brett Crosby as a means of giving accredited investors access to real estate investment opportunities. PeerStreet has originated over $500 million in real estate loans as of October 2017. Most remarkably, PeerStreet claims to have not lost a single dollar in investor principal throughout its entire existence.

Let’s get the skinny on PeerStreet’s real estate crowdfunding marketplace.

Best For…

Real estate companies seeking to connect to investors online.

How Does PeerStreet Work?

PeerStreet states the following regarding their loans:

PeerStreet loans are generally secured by first liens on real estate. PeerStreet partners with top-tier originators across the country and carefully vets their loans before making them available to our investors. Most of our loans are short in duration (6-24 months) with LTVs typically below 75%.

PeerStreet applies a servicing fee of between 0.25%-1.00% on each loan offered. Their loans offer, on average, 6-12% annualized returns.

PeerStreet Rules

PeerStreet runs extensive due diligence on both the loans advertised on its site and on its loan origination partners. Before a loan can be featured on PeerStreet, the company does the following:

  • Performs independent underwriting of all loans using both manual processes and big data analytics
  • Reviews an independent valuation (BPO/Appraisal)
  • Ensures each loan complies with PeerStreet’s underwriting guidelines
  • Reviews legal documentation

For loan origination partners, PeerStreet performs the following checks:

  • Reviews track records
  • Reviews financials
  • Reviews licensing and adherence to state usury laws
  • Runs background checks
  • Reviews legal and underwriting processes

PeerStreet’s campaigns have an investment minimum of just $1,000 — lower than the typical $10K investment minimum.

How To Start A PeerStreet Campaign

Contact PeerStreet with details of your loan campaign proposal and wait to hear what they think.

Takeaway

PeerStreet’s reputation among investors is second-to-none, so attracting investors to your real estate crowdfunding project may be easier than with other platforms. Their policy of complete transparency to investors (PeerStreet investors can review the performance of every loan ever featured on the site) and strict vetting for loans and loan originators makes PeerStreet a standout company among real estate crowdfunding platforms.

Visit the PeerStreet website

2) RealtySharescrowdfunding real estate

With over $700 million in real estate investments facilitated since its founding in 2013, RealtyShares is at the tip of the real estate crowdfunding spear. Both equity and debt crowdfunding are available, and every deal on the site is strictly vetted before being allowed to campaign. Read on to learn more about this heavyweight real estate crowdfunding contender.

Best For…

Connecting real estate businesses and projects — both commercial and residential — to accredited investors.

How Does RealtyShares Work?

RealtyShares names three different types of real estate investments that can be listed on its site.

(1)  Cash-flowing/Value-Add equity investments in commercial and residential properties such as apartments, retail, office and pools of single family homes;

(2)  Equity investments in Fix & Flips located in high demand/low supply markets;

(3)  Loans secured by residential and commercial real estate.

On the loan side, RealtyShares lists fixed-rate bridge loans, floating-rate bridge loans, small balance permanent loans, and triple-net loans. On the equity side, RealtyShares lists common and preferred equity offerings. Rates and fees for RealtyShares’s various debt and equity products are given on the website at the links provided.

RealtyShares Rules

RealtyShares does its due diligence for investors by running background and credit checks on all funding campaign sponsors. As for the cost of running a campaign, RealtyShares says the following:

Real Estate Companies that raise capital through our investment platform will be required to reimburse RealtyShares for its out of pocket expenses related to establishing and managing the fund that invests in your project.  These costs typically include legal, accounting and compliance costs.

The exact amount of the reimbursement will depend on the specific investment opportunity. Please contact us here for more details.

Only accredited investors can invest in a RealtyShares campaign. The minimum investment amount is $5,000.

How To Start A RealtyShares Campaign

Create an account on RealtyShares’s site and submit an application. The company will get back to you within 24-48 hours to let you know if you’ve been accepted. It will then request additional information. You’d better know what you’re doing, as RealtyShares states “Currently, only a small percentage of prospective investments are listed on the site.”

Takeaway

RealtyShares has a reputation for being one of the top platforms for crowdfunding real estate deals. Having financed over 1,000 projects in 39 states thus far, the company has a proven track record and is a solid choice indeed for the real estate business looking to source investment.

Visit the RealtyShares website

3) RealtyMogulreal estate crowdfunding sites

Launched in 2013 and headquartered in Los Angeles, RealtyMogul offers both equity and debt financing for real estate projects. Over $338 million has been invested thus far through RealtyMogul, financing over 350 commercial and residential properties valued at over $1.5 billion.

Let’s see what makes RealtyMogul tick.

Best For…

Raising equity for commercial projects and conducting debt crowdfunding for both commercial and residential real estate.

How Does RealtyMogul Work?

RealtyMogul’s FAQ details how their campaigns work, but here are some pertinent details. Real estate companies can raise from between $1 million and $5 million from accredited investors in an equity campaign for commercial real estate. Terms, rates, and fees for RealtyMogul equity raises can be found here.

RealtyMogul also offers debt campaigns for both commercial and residential real estate. Most of these loans are sold to institutional investors. RealtyMogul offers hard money loans, bridge loans, and permanent loans. Information regarding terms and fees can be found here.

RealtyMogul Rules

RealtyMogul runs background, criminal and credit checks on all who apply to campaign.

How To Start A RealtyMogul Campaign

You begin the application process on the website, providing information about your firm, the property in question, and other details. A company representative will then contact you, take you through the due diligence process, and work with you in setting up your campaign.

Takeaway

Through RealtyMogul, the Hard Rock Hotel Palm Springs raised more than $1.5 million in equity financing in what was the first equity crowdfunding campaign ever conducted by a hotel. A pioneer in the industry, RealtyMogul’s track record inspires confidence.

Visit the RealtyMogul website

4) MinnowCFundingcrowdfunding real estate

Founded in 2017, MinnowCFunding is a recent entry to the real estate crowdfunding race. Headquartered in Los Angeles, MinnowCFunding is a “funding portal” as defined by the law. This means it can offer Regulation Crowdfunding, or equity crowdfunding with non-accredited investors. MinnowCFunding does not offer debt crowdfunding.

MinnowCFunding consists of “a team of real estate veterans and advisors with over 50 years of collective experience underwriting and managing residential and commercial real estate.” Let’s learn more, shall we?

Best For…

Real estate companies looking to conduct equity crowdfunding campaigns that are open to all investors, not just accredited investors.

How Does MinnowCFunding Work?

Through MinnowCFunding, equity campaigns can be launched for the following real estate types:

  • Residential rental real estate
  • Commercial real estate
  • Industrial real estate
  • Retail real estate
  • Mixed-use real estate

Due to legal limits on Regulation Crowdfunding, a maximum of $1.07 million can be raised per year by any single entity.

Be warned that MinnowCFunding takes 7% of what you raise as a platform fee.

MinnowCFunding Rules

Companies looking to campaign for equity must undergo strict vetting: “Our experienced real estate and financial experts review the credentials and plans of the investment target.”

The minimum investment amount for a MinnowCFunding campaign is just $1,000.

How To Start A MinnowCFunding Campaign

Contact MinnowCFunding with your crowdfunding proposal and see what their agents tell you. The company doesn’t yet have a lot of information posted regarding the application process.

Takeaway

MinnowCFunding is the new kid on the block when it comes to real estate crowdfunding, yet they’ve generated a fair amount of buzz in the short time they’ve been around. Those in the real estate industry interested in Regulation Crowdfunding should give them a look.

Visit the MinnowCFunding website

5) AlphaFlowreal estate crowdfunding platforms

Judging by the name, you might assume AlphaFlow was some kind of non-FDA-approved prostate supplement. However, you would be libellously wrong. Shame on you.

Founded in 2015, AlphaFlow, in their own words, “purchases first lien mortgage notes from top-tier originators around the nation, providing non-conventional liquidity to residential real estate lenders..” Let’s look at AlphaFlow in greater detail.

Best For…

Connecting real estate companies to investors via loan originators. The loan originator offers the investor a balanced portfolio of diversified real estate investments — the investor doesn’t actually choose the individual projects to invest in.

How Does AlphaFlow Work?

AlphaFlow works with companies like PeerStreet to find residential debt crowdfunding campaigns. They take what they believe to be the best campaigns, make sure they are spread out across the US, and build portfolios to offer investors so the investor doesn’t have to do the heavy lifting.

AlphaFlow describes their loan products as follows:

  • Asset-backed (first-lien) mortgage note
  • Loan amounts between $75K-$2MM
  • 6-12 month duration
  • 7% + interest rate
  • Personal guarantee
 AlphaFlow Rules

The company states the following regarding loan originators wishing to use the platform:

AlphaFlow conducts extensive due diligence on each originator partner. Lender onboarding entails strict review of the firm’s management staff, historical loan performance, underwriting guidelines, quality control metrics, and onsite review by AlphaFlow of their lending operations.

How To Start An AlphaFlow Campaign

Individual real estate companies don’t apply to raise funds on AlphaFlow. Rather, lending platforms apply to AlphaFlow, and if the platform is onboarded, it serves as a source of residential debt deals from which AlphaFlow draws to build its portfolios for investors.

Takeaway

AlphaFlow makes investing in real estate easy by offering portfolios comprised of diversified, pre-vetted residential loans.

Visit the AlphaFlow website

6) Fundrisereal estate crowdfunding sites

Launched in 2012, Fundrise’s brand of real estate crowdfunding is somewhat akin to that of AlphaFlow. Fundrise’s investors see their investments spread out over the company’s portfolio, which includes both commercial and residential real estate. The investor doesn’t choose which projects to invest in.

Investors invest in Fundrise’s portfolio through the vehicles of the eREIT (an electronic Real Estate Investment Trust — it resembles a mutual fund for real estate projects) and the eFund (similar to the eREIT).

Best For…

People who want to invest in real estate but don’t want to choose the individual investments.

How Does Fundrise Work?

Fundrise sources real estate investment from around the US, then offers anybody and everybody (not just accredited investors) the chance to invest in Fundrise’s portfolio.

Fundrise doesn’t publicly release the duration, interest rates, etc. of their loan products. On the investor side, Fundrise allows investments of as little as $500 and takes a 0.85% annual asset management fee.

Fundrise Rules

There are no limits as to who can invest with Fundrise. As for real estate companies looking to raise funds with Fundrise, the company is not publicly seeking new projects right now, so no rules for companies looking for investment are given.

How To Start A Fundrise Campaign

You can’t apply for funding through Fundrise’s website, so you’ll have to contact the company via other channels if you have an irresistible deal to propose.

Takeaway

Fundrise is known for its supreme ease of use for the investor. It’s a great way for the average person to invest in something that is independent from the stock market.

Visit the Fundrise website

7) Patch Of Landcrowdfunding real estate

Born in 2013, Patch Of Land is a hard-money debt crowdfunding site for real estate investments — mostly residential, but some commercial. The company was founded by Jason Fritton (who lobbied for the passage of the JOBS Act that made real estate crowdfunding possible in the first place), and his brother Brian.

On Patch Of Land’s About page, the company posts the following mission statement:

Patch of Land aims to solve the problem of slow, inefficient, fragmented and obscure private real estate lending by using the latest technology, data and process efficiency to more accurately assign risk profiles and project viability, while greatly reducing time and cost of loan underwriting for borrowers with real estate projects that are overlooked or rejected by banks and traditional lenders.

Best For…

Real estate companies and the investors who love them.

How Does Patch Of Land Work?

For real estate projects, Patch Of Land offers three different types of loan program:

  • Fix & Flip Loan Program
  • Rental Loan Program
  • Commercial Loan Program

Details of each loan program are given at the link. One thing each has in common is that you can campaign for a maximum of $3 million USD.

Patch Of Land details the performance of its loans here. Some of the highlights: Patch Of Land has funded 986 loans to the tune of over $442 million with a realized rate of return of 10.88%. (Numbers current as of 3/25/18)

Patch Of Land Rules

Regarding the due diligence process, Patch Of Land states:

We will conduct due diligence process and review all the required documentation, including an appraisal. Typically we can close your loan in as little as seven days. Our process is transparent; we do not charge “junk fees” or hidden fees of any kind.

How To Start A Patch Of Land Campaign

Patch Of Land details the application process for borrowers here. Perhaps the highlight of the process is the fact that filling out the application, according to the company, takes only five minutes.

If you’d rather speak to a person about your prospective funding campaign, call a Patch Of Land agent at 1-888-959-1465 with details of your project.

Takeaway

Check out Patch Of Land’s track record and see if they might be the real estate funding solution you’re looking for.

Visit the Patch Of Land website

8) GroundFloorcrowdfunding real estate

GroundFloor provides debt crowdfunding for residential real estate developers. Founded in 2013 in Atlanta, GroundFloor offers fix-and-flip hard money loans for both accredited and non-accredited investors to, well, invest in.

You can invest as little as $10 in a GroundFloor crowdfunded real estate loan. Yes, $10, no typo. Though, I’m not entirely sure what the point of that would be.

Currently, GroundFloor can only be used in a limited number of US states. I’ll tell you which ones in a bit.

Best For…

Financing fix-and-flip real estate projects.

How Does GroundFloor Work?

GroundFloor describes their loans thusly to borrowers:

  • Rates starting at 5.4%
  • Fix-and-flip hard money loans from $75,000 to $2,000,000 for residential properties (Please note: cannot be owner-occupied)
  • Closing as fast as 15 days
  • Monthly payments or balloon payment at maturity date
  • All points can be rolled into the loan
  • No personal guarantee required
  • Lend up to 70% ARV (after repair value)
  • Borrow up to 90% LTC (loan to cost)
  • Fast and simple application with minimal documentation (no tax returns, no bank statements)

GroundFloor also touts 8-12% annualized returns on average on their loans with 6-12 month terms.

GroundFloor Rules

Of course, GroundFloor doesn’t let projects crowdfund loans without doing some vetting:

The product is based on venture loans to real estate entrepreneurs, originated and serviced by Groundfloor. Prior to offering, every loan is pre-funded by Groundfloor after a thorough vetting of the borrower’s experience, credit worthiness, and business plan, plus an assessment of the property value on an as-is and as-improved basis.

As of this moment, you can only raise funds through GroundFloor in the following states: Massachusetts, Maryland, DC, Virginia, Georgia, Illinois, Texas, Washington, and California. However, GroundFloor recently announced that due to their offering having just been qualified by the U.S. Securities & Exchange Commission under Tier II of Regulation A, they will be operating in all 50 states in short order. Just not quite yet.

Note that in a recent press release, the company said: “Groundfloor has not historically charged any investor fees, but may elect to begin doing so in the near future.”

How To Start A GroundFloor Campaign

If you reside in one of the aforementioned states, apply online and see what GroundFloor says. Alternately, call the company at 678-701-1194 and strike up a chat.

Takeaway

GroundFloor may only be getting started, but they seem to be making some moves to gain a foothold in the industry.

Visit the GroundFloor website

9) EQUITYMULTIPLEreal estate crowdfunding sites

With an all-caps name that makes me feel like I’m yelling at you just by typing it, EQUITYMULTIPLE offers commercial real estate crowdfunding in the form of syndicated debt, equity, and preferred equity raises.

EQUITYMULTIPLE is a young company, having been founded in 2015. However, extolling their familiarity with the field, EQUITYMULTIPLE states:

Experience matters. While other platforms are backed by venture capital companies, we’re backed by a real estate company – Mission Capital, a recognized national leader in commercial real estate debt & equity finance.

Best For…

Commercial real estate developers looking for crowdfunded investment, investors looking for real estate deals, and people who like shouting.

Only accredited investors can invest through EQUITYMULTIPLE.

How Does EQUITYMULTIPLE Work?

Here are the details of EQUITYMULTIPLE’s syndicated debt offerings:

  • Target Rate to Investors: 7-12%
  • Typical LTV: 50-75%
  • Typical Term: 6-24 months

The details for the company’s preferred equity offerings:

  • Target Current Preferred Return: 6-12%
  • Target Total Preferred Return: 50-75%
  • Typical Term: 1-3 years

Lastly, the company’s regular equity offerings:

  • Target Annual Cash Return: 6-12%
  • Target Internal Rate of Return to Investors: 14%+
  • Typical Term: 1-3 years

EQUITYMULTIPLE Rules

Regarding due diligence, EQUITYMULTIPLE describes the platform’s vetting process:

We will provide a comprehensive diligence request list. Once these items are received, our team will determine if the deal meets the requirements of EQUITYMULTIPLE’s investor network. During this time, the Sponsor and EQUITYMULTIPLE will begin discussions surrounding the terms of the anticipated Offering.

How To Start An EQUITYMULTIPLE Campaign

EQUITYMULTIPLE’s deal submission and funding process is detailed here. One key point: once you submit your deal, EQUITYMULTIPLE “will get back to you within two business days with follow-up questions or preliminary approval.”

Takeaway

EQUITYMULTIPLE is a real estate crowdfunding platform just finding its sea legs. Keep an eye on these folks.

Visit the EQUITYMULTIPLE website

10) Small Changereal estate crowdfunding sites

Launched in 2014 and headquartered in Pittsburgh, Small Change may not have the longest track record, but the equity real estate crowdfunding platform distinguishes itself by associating its brand with social responsibility:

We created Small Change to allow everyday people to invest in real estate projects that change cities and neighborhoods for the better, and we created our proprietary Change Index to track that change.

The Change Index is a way for Small Change to assess real estate developments in terms of their access to public transportation, the walkability of the area, access to parks and fresh food, and other factors.

Best For…

Developers of residential, commercial, and mixed-use properties that score sufficiently highly on the company’s Change Index. Non-accredited investors can invest in some projects, while others are strictly for accredited investors.

How Does Small Change Work?

Small Change advertises average returns of between 8-10%. The minimum investment amount on a Small Change project is just $500.

Small Change doesn’t provide much in the way of details as to how their investments perform. Hopefully, this will change in the future.

Small Change Rules

The company’s Change Index is a fairly comprehensive scoring system for how beneficial a real estate development is to the wider community. Projects must hit a certain target score on each metric before being allowed to use the platform. I recommend reading the details of the Index carefully if you’re thinking about using Small Change for your real estate venture.

How To Start A Small Change Campaign

You’ll have to create an account and get in touch with the company to ask about getting your project on the platform. Small Change doesn’t provide any granular detail as to how to do this.

Takeaway

It’s good that at least one real estate crowdfunder seems aware of the fact that not all real estate developments benefit the community and that such developments should be viewed through the prism of social responsibility. For that, I tip my cap to Small Change and the Change Index.

Visit the Small Change website

Final Thoughts

Real estate crowdfunding can hardly be said to be a mature industry at this point. After all, it’s only about six years old. As such, the industry is in flux, and my list of leading real estate crowdfunders would undoubtedly be different if I were to write this article in another few years.

That’s not to say real estate crowdfunding can’t work for you right now — indeed, evidence indicates quite the contrary. Check out the companies I’ve listed above if you want to get a good picture of where the industry stands today.

The post 10 Great Real Estate Crowdfunding Platforms For Businesses appeared first on Merchant Maverick.

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Real Estate Crowdfunding: Is It Right For Your Business?

real estate crowdfunding

With the increasing prominence crowdfunding has attained over the course of the last decade, I’m sure you’re broadly familiar with the concept of crowdfunding. You’ve probably heard of people using GoFundMe (see our review) to try to cover medical expenses and other personal emergencies. You’ve probably also heard of crowdfunding a la Kickstarter (see our review) in which backers contribute to the funding of a board game or gadget or male romper in exchange for rewards in the form of the board game/gadget/romper in question and/or related goodies.

the office swag GIF

However, if you’re involved in a real estate venture, it’s now possible to solicit investment in real estate via crowdfunding as well. As I’ll explain, this is a relatively recent phenomenon, but by allowing owners of real estate to launch public crowdfunding campaigns, funding can be drawn from a much broader pool of investors than was previously possible.

Let’s talk about exactly what real estate crowdfunding is and how it can benefit your real estate business.

Real Estate Crowdfunding & The Jobs Act

Prior to 2012, it was illegal to offer investment in the form of a public campaign in the US, as public solicitation of securities was forbidden by SEC rules. Therefore, real estate crowdfunding was out of the question.

However, the idea of what crowdfunding could be changed significantly when the JOBS Act of 2012 was signed into law. The passage of the Act was framed as a response to the lack of capital available to startups in the wake of the Great Recession, as it legalized the crowdfunding of securities. Subsequently, a great number of real estate crowdfunding sites have popped up.

What Is Real Estate Crowdfunding?

confused math GIF by CBC

Let’s be precise when we discuss real estate crowdfunding. The term encompasses two different forms of crowdfunding: equity-based and debt-based.

Equity-Based Real Estate Crowdfunding

When you open up your real estate venture to equity investment, investors become co-owners of the property in question and stand to profit in proportion to their ownership stake in the property. These profits come in the form of rental income and/or property appreciation.

Debt-Based Real Estate Crowdfunding

With debt-based real estate crowdfunding, you offer investors the chance to lend to you. In return, the investor is paid back the principal plus interest. Mortgages and hard money loans are examples of debt investments in a real estate context.

(For more general information on the differences between different forms of crowdfunding, our article “Types of Crowdfunding For Business: Debt, Equity, Or Rewards” is a good place to start.)

What Do These Differences Mean For Your Campaign?

The substantive difference between these two forms of real estate crowdfunding is that debt investment is safer than equity investment for the investor, but also less potentially lucrative. If something goes wrong and the property in question is foreclosed on, debtholders get paid before equity holders do, so there’s a smaller potential downside for the debt investor. Equity investors bear much more risk.

On the other hand, if the real estate venture does particularly well, equity investors get a share of the windfall profits whereas debt investors do not — they simply get interest on the loan. Equity investment is more high-risk-high-reward than debt investment when it comes to real estate. Keep in mind the type of investments your particular real estate project is likeliest to attract when setting the terms and structure of your real estate crowdfunding campaign.

In order to do this, however, you’ll need to understand what the capital stack is.

pancakes GIF

What Is The Capital Stack?

The capital stack is key to understanding commercial real estate financing (not so much residential real estate). The capital stack is comprised of the different layers of financing arrangements that go towards funding real estate projects. It delineates where investors stand in the pecking order relative to one other.

This is how investors are prioritized, with the highest-priority investors on the bottom:

  • Common Equity (lowest priority)
  • Preferred Equity
  • Mezzanine Debt
  • Senior Debt (highest priority)

Essentially, the risk increases the higher you are on the stack, but so do the returns. Here’s more information on the capital stack.

What Businesses Stand To Gain From Real Estate Crowdfunding?

Let’s discuss the two primary types of businesses that stand to benefit from this new market sector. The first should be fairly obvious.

Real Estate Developers

I can hear you right now: “No kidding, genius.” Of course real estate crowdfunding would appeal to real estate developers. The thing is, it’s the newer developers who stand to gain the most benefit from real estate crowdfunding. That’s because the more established firms have extensive pre-existing relationships with investors and other sources of equity. Crowdfunding isn’t necessarily going to be a priority for them.

Those who have entered the real estate business more recently, however, have every reason to explore crowdfunding. Launch a crowdfunding campaign through one of the many real estate crowdfunding sites out there, and you’ll gain access to investors that you just didn’t have previously — and these investors are the very investors who simply didn’t have easy access to real estate investment opportunities before crowdfunding and the JOBS Act came along.

Many real estate crowdfunders add value by pooling investors into an LLC or other entity specifically set up for the purpose. That way, investors don’t have to be dealt with individually.

Who else can take advantage of real estate crowdfunding to fund their business, you ask?

Real Estate Crowdfunding Platform Owners

This answer shouldn’t come as a shocker either. Think about it, though: real estate crowdfunding is a very new industry, having only just been legalized by the JOBS Act. There may never be a better time to get in on the ground floor of the industry than right now.

Of course, before you launch your real estate crowdfunding business, you’ll need to determine a) what types of financial products can be offered to investors on your site, b) what category of real estate to specialize in (commercial, residential, etc), c) how to build your web platform, and d) how best to market your platform to attract the attention of investors. But if you do your due diligence and manage to answer these big questions, you’ll be entering a field poised to expand by leaps and bounds over the next decade.

It’s estimated that the crowdfunding industry as a whole will be worth more than $300 billion by the year 2025. There are bound to be hiccups along the way, but if you’re thinking that the industry might be for you, this is the time to give it the ol’ college try.

Final Thoughts

1995 was a great time in which to launch an internet search engine. 1970 was a good time to get in on the polyester industry. Some industries present particular opportunities to attuned entrepreneurs at certain defined points in history. Are we in one of those periods now with respect to real estate crowdfunding? Obviously, nobody can say for sure, but all signs point to “Yes.”

Crowdfunding involving investments is legally complex, and federal prosecutors have unlimited resources. Therefore, be sure to get legal guidance from professionals before making the leap into real estate crowdfunding. But if you have the means and the inclination, this is the time to make your move. Don’t be left holding a bag full of woulda-coulda-shouldas while less-talented entrepreneurs rake in those real estate crowdfunding dollars that could have been yours!

The post Real Estate Crowdfunding: Is It Right For Your Business? appeared first on Merchant Maverick.

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8 Facts You Should Know Before Crowdfunding A Video Game On Fig

fig crowdfunding

For as long as I can remember, people have bemoaned the ever-accelerating consolidation of the video game industry. For much of the past two decades, small-to-mid-size game developers have been going bust as industry behemoths like EA grow ever more dominant. For those who have followed the industry, it’s an ever-present trend and one that is not likely to abate anytime soon.

However, the second decade of the twenty-first century has given rise to a phenomenon that could be seen as a countervailing force to this trend; a social media-powered boat, gamely pushing upstream against The Market’s unloved current. Crowdfunding pools the resources of those who want a piece of the next big thing, delivering grassroots funding to projects that would otherwise struggle to get funding.

Anyone with a cursory familiarity with crowdfunding could tell you what Kickstarter (see our review) and GoFundMe (see our review) are, but lesser-known specialty crowdfunders continue to pop up, catering to the particulars of individual industries.

Enter Fig. Launched in 2015 in San Francisco, Fig is a platform on which independent game developers and mid-size game studios can get video games crowdfunded. However, Fig is more than just a “Kickstarter for Video Games.”

It’s a unique crowdfunding system and one that presents unique challenges to those looking to use crowdfunding to finance their gaming dreams. Let’s go through what you need to know before using Fig’s crowdfunding platform for game developers.

1) Fig Provides Both Rewards Crowdfunding & Equity Crowdfunding For Video Games

With Fig, you can set up a crowdfunding campaign for your incipient game project that gives the would-be backer two options: back a traditional rewards crowdfunding campaign in exchange for a copy of the game, branded swag, expansion packs, etc., or back an equity crowdfunding campaign in which the backer becomes an investor who buys Fig Game Shares and thereby stands to profit from future sales of the game.

Actually, I lied. The backer also has a third option: back both!

You probably have a decent handle on what rewards crowdfunding is, but with Fig’s equity crowdfunding, investors fund your game’s development by buying Fig Game Shares (more on how Fig Game Shares work later). At the end of the process, the profits from sales of your game are divided between your company, Fig, and the equity investors who bought Fig Game Shares in your game

2) You Can Run Both A Rewards And An Equity Campaign Or Just A Rewards Campaign

I said in the introduction that Fig wasn’t just “Kickstarter for video games.” However, if you’re not trying to raise six or seven digits’ worth or capital, you can, in fact, treat Fig as if it were Kickstarter and just run a rewards crowdfunding campaign. Describe/show off your cool game, offer various rewards for different tiers of support, and hope to raise your goal within your funding period.

However, most Fig campaigners opt to run both a rewards campaign and an equity campaign concurrently. This way, you can attract support from the more casual backer who may want to see your game produced and ultimately receive a copy, as well as the investor who sees profit potential in your game idea and wants to support it in exchange for a cut of future sales.

Check out the campaign page for Pig Eat Ball if you want to see what Fig’s unique brand of rewards/equity hybrid crowdfunding looks like in action.

3) Fig Is Selective

Some crowdfunding platforms allow anybody who signs up and creates a profile to launch a crowdfunding campaign on their platform. Not Fig. According to the company, when a developer applies to use the platform:

We evaluate the game and the developer to determine whether, in our opinion, they have the potential to generate significant income based on criteria such as experience and talent of the developer, the developer’s record for delivering games on time and within budget, our estimates of potential sales of the game and the extent of the game’s existing social community and fanbase.

Also note that Fig only hosts one or two new funding campaigns per month. When considering whether to send your pitch to Fig, determine whether you can afford to, in effect, wait in line for your chance to be featured on the site.

4) Funding Is All-Or-Nothing For Both Rewards And Equity Campaigns

Just about every crowdfunding platform requires you to set some kind of funding goal before launching your campaign. Some crowdfunders let you keep whatever money you end up raising regardless of whether or not you’ve reached your funding goal before your funding period ends.

Not so with Fig. Launch a Fig crowdfunding campaign, and you’ll have to meet or exceed your funding goal before you can collect. Fail to reach your funding goal, and you’ll get nothing at all. This goes for both rewards and equity campaigns. You’ll want to have done your due diligence before launching your campaign with Fig, as an 80% funded project will see you get 0% of the cash.

5) Investors Aren’t Actually Buying Shares Of Your Company

Launch an equity crowdfunding campaign with Fig and you won’t have to worry about investors owning a portion of your intellectual property. That’s because with Fig’s unique equity crowdfunding system, the investor invests in stock created by Fig to pay dividends based on the sales receipts from the game post-release. Fig describes the system like so:

Developers maintain 100% creative control and IP ownership over their game. The community invests in Fig Game Shares, which pay out based on Fig’s own revenue share gained through a licensing agreement with the developer, and Fig takes on the accounting and legal risk associated with the investments as it’s our stock. Developers are not involved in selling investments, nor are investors investing in studios or IP.

Here’s where you can learn more about Fig Game Shares. Essentially, they allow you to retain full ownership of your company and its products while offering investors the chance to profit from your future game sales commensurate with the proportion of Fig Game Shares they purchased.

6) Fig’s Rewards Crowdfunding Campaigns Carry No Platform Fees

If you’re using Fig as if it were Kickstarter and just want to run a rewards campaign, there’s one way in which Fig is actually superior to Kickstarter. Let me explain.

Kickstarter, like most non-charitable crowdfunding sites, charges a 5% platform fee from what you raise. Factor in payment processing fees, which can come to about 3-5% of what you raise, and you could be paying 8-10% of what you raise in fees.

Fig, however, does things differently. Launch a rewards campaign with Fig and you won’t pay any platform fees. You will only have to pay credit card processing fees. These will come out to about 2.5% of what you raise. If you’re an independent game publisher looking to use rewards crowdfunding to get your project started, this factor alone gives Fig a leg up on the competition.

For Fig’s equity crowdfunding campaigns, the company states the following:

If and only if the campaign succeeds, a portion of Fig’s out-of-pocket legal and accounting transaction costs will be deducted from the investment proceeds (up to 5%).

7) Fig Can Publish Your Game As Well

Fig states the following regarding its publishing services:

Fig stands as a non-exclusive co-publisher of your game, so you can maintain control over the publishing of your game while receiving Fig’s support in distribution and marketing. Fig is open to exclusively publishing your game if that is your desire. Some developers have requested we exclusively publish their games.

Fig’s publishing services can be opted into — you are not required to use them to publish your game.

8) You Can Run A Private Funding Campaign Before You Go Public

Is your video game idea still in its embryonic stage? Is it unworthy of being seen by the general public at this point? You might want to consider running a private funding campaign before you run a public one.

Fig’s Backstage Pass Program lets you do exactly this. Through this program, Fig’s most hyper-attuned backers can evaluate your campaign away from the prying eyes of the public and give you valuable feedback, all while you start the fundraising process, getting a head-start on your public crowdfunding campaign.

Disclaimer

Here’s a disclaimer I’ve started attaching to everything I write related to equity crowdfunding:

Bear in mind that equity crowdfunding is a still-evolving field, with the full impact of the JOBS Act still being assessed. Equity crowdfunding is a more complex proposition than, say, rewards-based crowdfunding, as investing is much more substantially regulated. Consult an attorney if you have any legal questions regarding the process, SEC regulations, taxes, etc.

Final Thoughts

No form of popular entertainment inspires as much passionate devotion (among other things) as does the video game. For those looking to get in on the ground floor of the industry, crowdfunding is a way you can fund your passion projects while a) retaining control of your work, and b) not going into debt.

Fig’s particular brand of video game crowdfunding gives independent developers and game studios alike the ability to fund their work by monetizing the all-consuming devotion of video game fans. Just make sure you know the essentials before you embark on your crowdfunding journey.

The post 8 Facts You Should Know Before Crowdfunding A Video Game On Fig appeared first on Merchant Maverick.

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GoFundMe Alternatives: 10 Sites Like GoFundMe For Business Funding

gofundme alternatives

In terms of raw numbers, GoFundMe (see our review) stands atop the crowdfunding industry. With over $5 billion in crowdfunded dollars raised from over 50 million donors since its founding in 2010, no crowdfunding platform has been able to match GoFundMe in terms of transferring money to those who need it. What’s more, since late 2017, GoFundMe has started eliminating their 5% platform fee for individual crowdfunding campaigns (the 0% platform fee now applies to campaigns started in the US, UK, and Canada).

However, there are plenty of reasons why an entrepreneur looking to crowdfund a startup or a small business might look for an alternative to GoFundMe. While people can and do use GoFundMe to fundraise for businesses, the vast majority of campaigns on the site are personal campaigns for charitable causes, often to cover medical expenses. Facilitating commerce isn’t the focus of GoFundMe’s brand.

Let’s go through some of the GoFundMe alternatives you can use to fund your business.

Kickstarter

Kickstarter (see our review) needs no introduction, but I’ll write one anyway out of habit. Between Kickstarter’s 2009 birth and today, the company has become synonymous with crowdfunding. Kickstarter has raised over $3.5 billion in funding pledged to its campaigns (more than any crowdfunding site besides GoFundMe), boasts more than 140,000 successfully funded projects with over 14 million total backers. You might say the folks at Kickstarter have hit the big time.

Kickstarter embodies the concept of rewards crowdfunding: crowdfunding in which backers support campaigns and receive rewards in return, typically in the form of the product being produced.

Best For…

Kickstarter helps artists, musicians, filmmakers, designers, and other creators find the resources and support they need to make their ideas a reality.

Thus reads Kickstarter’s About page. It sums up Kickstarter’s target audience: those in the business of creating things to share with others. For instance, Kickstarter almost single-handedly spawned the current “golden age” of tabletop games. Game makers found Kickstarter to be the ideal platform from which to launch their passion projects. Tech startups have hit paydirt on the platform as well.

How Does Kickstarter Work?

Kickstarter’s product on offer is its rewards crowdfunding platform. The details of the platform are as follows:

  • Campaigns can be open for 30 to 60 days
  • Campaigns are all-or-nothing — you either meet your funding goal by the time your campaign ends, or you get no funds whatsoever
  • A 5% platform fee is taken from what you raise
  • A 3% + $0.20 payment processing fee is taken from each pledge made to you

Kickstarter Rules

Kickstarter has five rules for projects:

  • Projects must create something to share with others
  • Projects must be honest and clearly presented
  • Projects can’t fundraise for charity
  • Projects can’t offer equity
  • Projects can’t involve prohibited items

Pay special attention to the first rule. In order to host a Kickstarter crowdfunding campaign, you must offer rewards to your potential backers. It’s not optional. Furthermore, these rewards must be of your making and must relate to your project. They can’t just be whatever you have sitting around the house.

How To Start A Kickstarter Campaign

Go to the website, choose a category, enter the basic details of your project into the form, and confirm your identity. When you submit your project for review, you might pass the automated check and be able to start immediately, or your project might be flagged for additional screening, which can take up to three days. Kickstarter estimates that about 80% of submitted projects are accepted.

Takeaway

Hobbyists, tech geeks, and superfans continue to demonstrate their willingness to spend money on crowdfunding projects in order to get in on The Next Big Thing, and Kickstarter is the best-known place to do just that. Their track record of crowdfunding success is second to none. It’s very competitive, though, so you best have done your due diligence prior to launch. If you have, who knows? Your project could take off on social media and become the next great cultural phenomenon; the next viral dream that captures the imagination of a generation; the next RompHim.

romphim

I only pray you experience such spiritual validation in your lifetime. Kickstarter: Catch the fever!

Read our full Kickstarter review

Visit the Kickstarter website

Indiegogo

Indiegogo (see our review) was launched at the Sundance Film Festival in 2008. It was originally conceived as a crowdfunding platform for independent films. Soon thereafter, Indiegogo expanded its mission, and is now a leader in the crowdfunding industry. Indiegogo’s rewards crowdfunding platform is more flexible and less exclusive than that of Kickstarter, as Indiegogo doesn’t prescreen projects prior to launch. Many startups have found success on Indiegogo after being rejected by Kickstarter.

Indiegogo also hosts equity crowdfunding campaigns through a joint venture with MicroVentures (see our review). Equity crowdfunding means your backers are purchasing shares in your company — they aren’t just backing you to get a t-shirt or a board game. Because equity crowdfunding involves investing, it is much more heavily regulated than rewards crowdfunding. Unlike Indiegogo’s rewards crowdfunding campaigns, the requirements to launch an Indiegogo equity crowdfunding campaign are fairly stringent. The bulk of Indiegogo’s business is on the rewards crowdfunding side.

Best For…

Indiegogo appeals to a lot of the same entrepreneurs and creators as Kickstarter. Tech, games, and the arts (particularly movies, no surprise) are well represented in Indiegogo’s campaign listings. But because Indiegogo doesn’t curate its campaigns the way Kickstarter does, a broader array of businesses can fundraise successfully with Indiegogo.

How Does Indiegogo Work?

Indiegogo’s rewards crowdfunding platform carries the following conditions:

  • Campaigns can last up to 60 days
  • You can choose a keep-what-you-raise campaign (you keep what you raise whether you meet your funding goal or not) OR an all-or-nothing campaign
  • 5% platform fee
  • 3% + $0.30 payment processing fee (per pledge)

Indiegogo Rules

Indiegogo doesn’t restrict entry to its platform — you can start a campaign for just about any non-charitable purpose. Unless you’re later found to be operating a fraud or otherwise violating the terms of service, you’re good to go. And unlike Kickstarter, Indiegogo doesn’t mandate that you offer rewards. They do highly recommend it, however. Campaigns that don’t offer rewards have a tendency to fail.

How To Start An Indiegogo Campaign

Just go to Indiegogo’s website, click “Start A Campaign,” detail your campaign, and launch it!

Takeaway

Indiegogo’s welcoming approach and flexible campaigns make it an excellent crowdfunding choice for businesses and artists of all stripes.

Read our full Indiegogo review:

Visit the Indiegogo website

Patreonpatreon

Patreon (see our review) may be a rewards crowdfunding site, but compared to the likes of Kickstarter and Indiegogo, Patreon is a beast of a different nature. Launch an Indiegogo campaign, and it’s a one-time deal. Once your campaign ends after 30 or 60 days, you get what you get, and that’s that. But with Patreon, your campaign is continuous. It doesn’t end unless you end it. Patrons sign up to support you on a recurring basis (either per-month or per-creation), somewhat akin a subscription service. In return, you provide your patrons exclusive content. Founder and musician Jack Conte discussed his motivations in a 2013 article:

“I’m releasing new things on a monthly basis. I have friends releasing material weekly,” Conte said. “They’d have to almost invent an excuse to raise money after going on Kickstarter once. We’re saying, ‘No, no. Don’t make up a new endeavor. Keep doing what you do best and let people pay you each time you do that.”

Best For…

Those in the business of creation will find Patreon an ideal crowdfunding platform. Game designers, journalists, musicians, comic book artists, and YouTubers are all to be found, though podcasters have had particular success on the platform. From Chapo Trap House to Sam Harris to everything in between, Patreon has been a boon to podcasters.

One thing Patreon has allowed in the past that most crowdfunding sites haven’t is a certain degree of adult content, though that has been changing as of late.

How Does Patreon Work?

These are the terms of using Patreon:

  • Funding duration is unlimited
  • Can charge patrons per month OR per creation
  • 5% platform fee
  • ~5% payment processing fee

Patreon Rules

As long as you don’t violate the terms of service (which are more relaxed than those of many competitors), you should be fine.

How To Start A Patreon Campaign

Sign up online, fill in the form fields, and poof, you’re in!

Takeaway

If creation is your business and GoFundMe doesn’t quite fit what you do, Patreon and its innovative brand of continuous rewards crowdfunding provide a means of monetizing your work.

Read our full Patreon review

Visit the Patreon website

FundRazrfundrazr

FundRazr (see our review) refers to itself as “Canada’s leading crowdfunding platform.” Though that places it well behind the likes of Kickstarter in regards to total money raised, FundRazr distinguishes itself by having an exceptionally good reputation for a crowdfunding site among both donors and campaigners. I had a hard time finding comments from user upset with the product. This is most definitely not the case with most of the competition!

FundRazr hosts a wide variety of personal and charitable crowdfunding campaigns, though they host business campaigns as well (and not just in Canada).

Best For…

Pretty much any business with something to offer backers can make use of FundRazr.

How Does FundRazr Work?

This is what a FundRazr crowdfunding campaign entails:

  • No mandatory time limit for campaigns
  • Keep-what-you-raise OR all-or-nothing funding — your choice
  • 5% platform fee
  • 2.9% + $0.30 payment processing fee (per pledge)

FundRazr Rules

FundRazr doesn’t prescreen campaigns, nor does it have any particular bent as to what sort of businesses it favors. And while business campaigns should offer rewards, it isn’t mandatory.

How To Start A FundRazr Campaign

Create an account, fill in the details, and you’re on your way.

Takeaway

FundRazr isn’t the most high-profile crowdfunding service in the business, but its exceptional reputation for treating people well makes it worth considering for the startup in need of funding.

Read our full FundRazr review

Visit the FundRazr website

Fundablefundable

The name resembles FundRazr, but this is a very different platform. Ohio-based Fundable (see our review) is a crowdfunding platform exclusively for businesses. Fundable hosts both rewards and equity-based funding campaigns. Rather than charge a platform fee to users, Fundable charges a monthly fee of $179 to all campaigners. It’s a system that favors serious startups and early-stage companies over small-time artists and creators.

Fundable has sent $411 million in crowdfunded dollars to businesses thus far. Not too shabby at all.

Best For…

Fundable hosts crowdfunding campaigns for a wide variety of businesses, though tech, food service, and healthcare companies are particularly well-represented.

How Does Fundable Work?

Fundable lets you launch both rewards and equity crowdfunding campaigns, though not both simultaneously. Some businesses start with a rewards campaign and, once successful, use the campaign’s success to demonstrate the product’s viability in the market to investors, thus laying the ground for an equity campaign.

Here’s how Fundable campaigns work:

  • No mandatory time limit for campaigns
  • All-or-nothing funding
  • $179 monthly fee
  • 3.5% + $0.30 payment processing fee (rewards campaigns only)

Given the monthly fee and all-or-nothing funding, if your campaign is unsuccessful, you won’t just have raised nothing — you’ll have spent money in order to raise nothing. Try not to fail!

Fundable Rules

Though just about any business can apply to use Fundable, the company prescreens every campaign profile submitted before allowing it onto the platform. A poorly-resourced startup may have better luck using a site with no barrier to entry, like Indiegogo, to crowdfund.

How To Start A Fundable Campaign

Fill out the online application, submit it, and wait for an answer from the company.

Takeaway

Fundable’s terms and fees make it tough for the little guy, but a startup with high growth potential stands to benefit from the absence of the 5% platform fee many crowdfunding sites impose. After all, if you raise $50K, well, 5% of $50K is a lot more than Fundable’s $179 monthly fee!

Read our full Fundable review:

Visit the Fundable website

Wefunderwefunder

Wefunder (see our review) has been an innovator in the equity crowdfunding space. A purely business-oriented crowdfunding platform. Wefunder hosts equity campaigns in which non-accredited investors can invest (this is known as Regulation Crowdfunding). The term “accredited investor” basically just means “rich person,” so by allowing non-accredited investors (i.e. everyone) to invest, you’re casting a wider net in your hunt for investors, so to speak.

Equity crowdfunding with non-accredited investors has only been legal since May 2016, but so far, Wefunder holds 50% of the market share in Regulation Crowdfunding. It’s a new field, but Wefunder has it figured out more than anybody.

Best For…

Wefunder hosts funding campaigns for many different business types (particularly craft breweries), but as equity crowdfunding is harder to pull off for unless your project already has some resources behind it, Wefunder is best for startups whose high-profit potential is apparent to investors. In fact, Wefunder states that of the 174 companies that have hit their funding goal on Wefunder’s site, “most are alumni of Y Combinator.” The cream of the crop, in other words.

How Does Wefunder Work?

Wefunder offers equity crowdfunding under the following terms:

  • 1-year funding limit
  • All-or-nothing funding
  • $195 one-time fee
  • 7% platform fee
  • No payment processing fees (all funds are transferred offline)

The 7% platform fee seems a bit high, but consider that with most crowdfunding sites, an additional 3-5% goes to the payment processor, making that apparent 5% platform fee more like 8-10%. Wefunder doesn’t handle online payments, so there are no processing fees to be paid.

Wefunder Rules

Wefunder allows just about any applying company onto its site. The company doesn’t do the heavy vetting that other equity crowdfunders engage in. Wefunder recommends having at least one experienced investor endorse your campaign and set the terms of your raise, but that’s not a requirement.

How To Start A Wefunder Campaign

Just apply online on the website.

Takeaway

Wefunder is one of the few crowdfunding companies with a track record of success in Regulation Crowdfunding. Startups with high growth potential have reason to take a closer look.

Read our full Wefunder review

Visit the Wefunder website

Crowdfundercrowdfunder

The forgettably-named Crowdfunder (see our review) is unapologetic about being an equity crowdfunding platform for “high-impact ventures” only. Crowdfunder’s equity campaigns are open to accredited investors only, meaning that you’ll be drawing from a smaller, richer, and likely more selective pool of investors than with Wefunder. (Note that the British rewards crowdfunding site named Crowdfunder is an entirely different company)

$160 million in investment commitments have been made via Crowdfunder.

Best For…

Crowdfunder has specific ideas about the identity of its target audience:

Crowdfunder is designed for early-stage startups and more mature businesses raising seed stage, Series-A & Series-B funding. Our offering does not cater to inception stage companies at this time.

Tech, software, and investment companies comprise many of the businesses using Crowdfunder

How Does Crowdfunder Work?

Here are the details of Crowdfunder’s platform:

  • No mandatory time limit for campaigns
  • Keep-what-you-raise funding
  • $449-$749/month subscription fee (depends on your subscription package)
  • No platform fees or payment processing fees (funds are transferred offline)

Crowdfunder’s monthly subscription fees are high. No getting around it.

Crowdfunder Rules

You can set up a profile for free, but in order to actually start your equity campaign, Crowdfunder will have to approve your plans.

How To Start A Crowdfunder Campaign

Sign up and apply through the website, silly.

Takeaway

If your startup company has boundless potential in the eyes of investors, Crowdfunder is a very intriguing prospect. Though the monthly fees are high, they’ll be worth it in the end if you raise a significant sum, as Crowdfunder campaigns don’t carry a percentage platform fee.

Read our full Crowdfunder review

Visit the Crowdfunder website

Ululeulule

Headquartered in Paris, Ulule (see our review) is one of Europe’s largest rewards crowdfunding platforms. It’s not widely known in the US, but if you’re in North America and your project appeals to the European market, it’s definitely a crowdfunding site to consider.

Ulule distinguishes itself with what it claims is the highest rate of successful campaigns for any crowdfunder: 65%. The company attributes this to its focus on personalized coaching, which it provides to all campaigners. Indeed, Kickstarter’s success rate is approximately half that of Ulule!

Best For…

Any sort of business can campaign on Ulule, though art-related startups seem to do particularly well.

How Does Ulele Work?

Ulule’s crowdfunding campaigns are structured like so:

  • Campaigns can last up to 90 days (45 is recommended)
  • All-or-nothing funding
  • Platform fees: 6.67% of all funds received via credit card, 4.17% of funds received via check or PayPal
  • ~3% payment processing fee

Ulule’s fee structure could stand to be less complex.

Ulele Rules

Launching a Ulule crowdfunding project requires passing two validation stages. Ulule really wants to make sure your plan is solid before letting you loose on the platform. If you are ultimately accepted, you’ll be assigned a “success manager” to help you with every stage of your campaign. Compared to most of the competition, particularly in the rewards crowdfunding space, Ulule is quite hands-on in its approach to campaigners.

How To Start A Ulele Campaign

Write Ulule an essay explaining why you think you’re worthy of their platform and send it to them in the mail.

I kid, I kid. Just apply online.

Takeaway

Ulule does things differently than most of the crowdfunding sites on this side of the pond. More consultation, more guidance. Does this approach jibe with your needs? If your company produces things that have Continental appeal, give Ulule a closer look.

Read our full Ulule review

Visit the Ulule website

Republicrepublic review

Republic (see our review) is, like Wefunder, a Regulation Crowdfunding platform — an equity crowdfunding outfit open to any and all investors.

Founded by AngelList alumni and considered to be an AngelList spinoff, Republic stands out for its public commitment to social justice. The company’s About page details their intention to help level the playing field when it comes to capital by prioritizing women, minorities, and others who the investing world has historically overlooked.

Best For…

Republic may have egalitarian aspirations, but equity crowdfunding is nonetheless best suited to companies with uniquely high-profit potential.

How Does Republic Work?

Republic’s equity crowdfunding campaigns are structured as follows:

  • 1-year funding limit
  • All-or-nothing funding
  • 7% platform fee
  • 3.5% payment processing fee for payments made via credit card

Republic Rules

Companies applying to Republic undergo a thorough evaluation before being allowed to raise funds. The following factors will be taken into consideration:

  • Experience of founders and management team
  • Products, services, and market
  • Revenue and growth
  • Customer base and demographics
  • Fundraising needs
  • Offering terms
  • Business plan
  • Financial health
  • Recordkeeping procedures

How To Start A Republic Campaign

Just apply online through the website.

Takeaway

Being an AngelList spinoff, Republic is already making waves in the equity crowdfunding world. Does its idealistic outlook match reality? The years to come should give us our answer. In the meantime, if you run an exceptional startup and you come from a historically-underserved community, Republic wants your attention.

Read our full Republic review

Visit the Republic website

Kiva USkiva logo

And now for something completely different.

Kiva US (see our review) doesn’t offer rewards crowdfunding or equity crowdfunding. What the heck do they do, then? They offer debt crowdfunding, otherwise known as crowdfunded loans. Kiva US is a nonprofit entity, and the crowdfunded loans it offers carry 0% interest. Not bad, eh? It may be the only platform in which lenders stand to make no profit whatsoever. Kiva’s mission is to open up the lending world to businesses that would otherwise struggle for funding. If you need $10K or less for your business and are willing to wait a bit for your money, Kiva’s crowdfunded loans just might be for you.

Best For…

Absolutely any sort of business can apply for a Kiva US crowdfunded loan.

How Does Kiva US Work?

Here are the details of Kiva’s crowdfunded loans:

  • Borrowing amount: $25 – $10K
  • Term length: 6 – 36 months
  • 0% interest
  • Time to funding: 1-3 months

Kiva US Rules

The only requirement to receive a Kiva US loan is that you put the money towards business expenses.

How To Apply For A Kiva US Loan

Yes, you apply online, but that’s only the first step to getting a Kiva loan. The entire process is as follows:

  1. Fill out an application online
  2. Enter the approval stage
  3. Enter a 15 day private funding period
  4. Enter a 30 day public funding period
  5. Get funds within 5 – 7 days

The process takes a while — certainly longer than with other lenders — but then again, crowdfunding with rewards/equity is hardly an instantaneous process either.

Takeaway

If you own a business, you need less than ten grand, and you want a loan you won’t have to pay interest on, Kiva US is your only funding option. Assuming you can wait a while before seeing any funds, there’s no reason whatsoever not to give it a shot.

Read our full Kiva US review

Visit the Kiva US website

Final Thoughts

If you find yourself looking for a crowdfunding site with more business-specific features than GoFundMe, the ten companies I’ve mentioned are all solid possibilities, depending on the nature of your business, its potential, and whether you want to offer rewards, equity, or debt payments with interest to your potential backers. Consider what makes sense for your business, then make the jump while you can! Your ideas won’t stay ripe indefinitely. Don’t wait too long!

The post GoFundMe Alternatives: 10 Sites Like GoFundMe For Business Funding appeared first on Merchant Maverick.

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The 7 Best Equity Crowdfunding Sites For Businesses And Entrepreneurs

So, what is equity crowdfunding, anyway?

Let’s start with the term “crowdfunding.” If you’re only loosely familiar with the concept, you might think of GoFundMe’s brand of medical and charitable crowdfunding. You may also think of rewards-based crowdfunding platforms like Kickstarter and Patreon in which entrepreneurs and artists solicit funds from backers in exchange for a physical product or exclusive creative content.

What if I told you that there existed an entirely different form of crowdfunding — one in which entrepreneurs and startups receive funding from backers in exchange, not for gifts or products, but for an equity stake in the company? A crowdfunding campaign in which the backers are investors?

Equity-based crowdfunding got its start later than rewards crowdfunding because crowdfunding involving investments was, until relatively recently, illegal in the US. Enter the Jumpstart Our Business Startups Act, better known as the JOBS Act. Passed by Congress and signed into law by President Obama in 2012, the JOBS Act amended federal securities regulations to legalize equity crowdfunding. The reasoning was that allowing startups to publicly solicit investment via crowdfunding would help spur the economy in general and startup formation in particular.

The various portions of the Act, however, did not immediately come into force. For instance, the provision that allowed the offering of equity investment to non-accredited investors (more on what this means later) wasn’t actually enacted until 2016. Suffice to say, equity crowdfunding is new. In fact, the reality of equity crowdfunding hasn’t yet lived up to the loftier predictions of those who pushed its creation. Nonetheless, the fact remains that billions of dollars have been raised by startups and companies via equity crowdfunding. For the right kind of business, equity crowdfunding represents a prime opportunity.

If your company is still just getting off the ground, however, you might find that rewards crowdfunding is a better fit for your enterprise, considering that investors tend to be less starry-eyed than the typical crowdfunding project backer. In this case, you might want to read our reviews of Kickstarter, Indiegogo, and Patreon. Bear in mind that in many cases, a successful rewards crowdfunding campaign can set you up for an equity crowdfunding campaign by showing proof of demand to potential investors.

Let’s take a look at the leading equity crowdfunding sites and what they have to offer growing businesses.

But First, A Warning

Let’s pump the brakes for a moment and go over the disclaimer I’ve started putting on my equity crowdfunding reviews:

Bear in mind that equity crowdfunding is a still-evolving field, with the full impact of the JOBS Act still being assessed. Equity crowdfunding is a more complex proposition than, say, rewards-based crowdfunding, as investing is much more substantially regulated. Consult an attorney if you have any legal questions regarding the process, SEC regulations, etc.

In short: Equity crowdfunding is legally complex. Be careful and don’t get into trouble!

Crowdfunder

crowdfunder

Crowdfunder (see our review) was launched in Los Angeles in 2012 with a mission to, in the company’s own words, “empower thousands of entrepreneurs to grow high-impact ventures.” The company provides the following figures regarding equity funding services:

  • $160,000,000 in investment commitments on the platform
  • 12,000 individual & institutional investors
  • 36,000 companies
  • Funded 100+ deals with an average deal size of $1.8M

Let’s take a closer look at the equity crowdfunding platform with the hopelessly generic name. (The company shares its name with an unrelated British rewards crowdfunding site.)

Best For…

Crowdfunder is very explicit regarding its target audience:

Crowdfunder is designed for early-stage startups and more mature businesses raising seed stage, Series-A & Series-B funding. Our offering does not cater to inception stage companies at this time.

The platform accepts businesses that fall into a variety of categories including Tech Startups, Social Enterprises, Small Businesses, and Film & Entertainment.

A look through the companies currently campaigning on Crowdfunder reveals more tech companies than anything else, with financial/investment companies a close second.

Products Offered

Crowdfunder allows companies to raise money via Title II equity crowdfunding. For those who aren’t familiar with what I mean, here’s a brief explainer.

Title II equity crowdfunding essentially means your crowdfunding campaign can solicit investment from accredited investors only. An “accredited investor” is defined someone who either has a net worth of $1,000,000 minus the value of their principal residence OR who made more than $200,000 a year for the past three years. The term simply refers to someone with a certain level of wealth/income — it does not denote any particular investment skill.

Title III equity crowdfunding, or Regulation Crowdfunding, means you can solicit investment from anybody — both from accredited investors and those who are not. Title III crowdfunding was legalized more recently than Title II crowdfunding and is currently less widely used. On its website, Crowdfunder explains why it does not currently allow Title III crowdfunding.

With Crowdfunder, all funds are transferred offline, so Crowdfunder doesn’t take a percentage cut of what you raise. And while it won’t cost you anything to create a (non-public) profile on the platform, you’ll need a monthly subscription in order to launch your equity campaign.

  • Crowdfunder’s Starter package, for $299/month, lets you take your profile public and start raising money.
  • The Premium plan, at $499/month, gives you the above while letting you browse and contact the accredited investors on Crowdfunder’s platform. You also get advanced data/metrics and up to one hour per month of phone support.

I’ll note that in addition to equity-based crowdfunding, Crowdfunder lets you raise money via debt, convertible note, or revenue share offerings. Furthermore, Crowdfunder’s funding campaigns are keep-what-you-raise — you don’t have to hit a specific funding goal to collect funds.

Requirements

Anyone can set up a profile on Crowdfunder’s website, but in order to launch your campaign, you’ll have to prepare and submit three documents: the Term Sheet, the Executive Summary, and the Investor Pitch Deck. These documents are complex, particularly the Term Sheet. Crowdfunder recommends that you work with an attorney when creating your financial offering.

Of course, you’ll also need to buy a monthly subscription before raising funds.

How To Apply

Anyone can set up a profile on Crowdfunder and submit the documents required for taking your campaign public. However, upon reviewing your documents, it’s up to Crowdfunder’s sole discretion to determine whether your business is “high-impact” enough for their platform.

Takeaway

Startups with boundless growth potential, particularly tech and investment startups, stand to potentially raise significant sums through Crowdfunder’s equity crowdfunding platform. While the monthly fees are high, they’ll be worth it if your campaign is successful, as Crowdfunder doesn’t charge a platform fee.

Read our full Crowdfunder review

Visit the Crowdfunder website

EquityNet

Like Crowdfunder, EquityNet (see our review) is an equity crowdfunding site that doesn’t process transactions itself, but rather facilitates offline transactions between campaigners and investors. Founded in Fayetteville, Arkansas in the pre-crowdfunding days of 2005 as a private investment company, EquityNet started offering equity crowdfunding after the enactment of Title II of the JOBS Act.

Best For…

EquityNet markets itself to a broader range of entrepreneurs and businesses than does Crowdfunder. EquityNet states in its FAQ that they are not just a platform for high-tech and high-growth businesses:

EquityNet is designed with flexibility to accommodate all ranges of private businesses, whether it’s an $100M/yr in revenue international biotech company, a pre-revenue one person software start-up, or a modest one-location coffee shop.

Products Offered

EquityNet offers entrepreneurs and businesses the ability to use its equity crowdfunding platform. EquityNet’s equity campaigns operate under Title II rules, so you’ll be raising funds from accredited investors only. You’ll also get to keep everything you raise regardless of whether you hit your funding goal.

Since all funds are transferred offline, EquityNet doesn’t take a cut of what you raise. Instead, EquityNet operates on a subscription basis. You can actually sign up with EquityNet and publish your business profile for free, but if you want to, say, share your business plan with investors (investors typically like to see a business plan before investing in something!), you’ll need one of EquityNet’s three subscription plans.

  • The Full Access package goes for a one-time fee of $900 and gives you full access to the accredited investors on the site. You’ll also get full access to fundraising documents and EquityNet’s patented business planning tools.
  • The Premium Consulting package goes for $2,500 and gives you all of the above, plus access to one-on-one consultations with an EquityNet team member regarding every aspect of your business plan, funding strategy, pitch, marketing, and more.
  • The EquityNet + plan costs a whopping $25,000 and gives you the ultimate hands-on equity crowdfunding package in which the company tailors everything to your exact needs.

Also note that since all transactions between entrepreneurs and investors occur offline, you can theoretically enter into a debt funding arrangement with an investor or even seek a grant. It’s up to you.

Requirements

Anyone can freely set up a business profile page on EquityNet. However, EquityNet reserves the right to remove profiles for any reason.

Of course, you’ll need a paid subscription if you want to run an equity funding campaign with any likelihood of success.

How To Apply

Just sign up with EquityNet and set up your profile. EquityNet does not pre-screen businesses before allowing them onto the site.

Takeaway

The folks at EquityNet make a point to try to attract a broad range of businesses to their platform. It’s not just for Silicon Valley tech startups and investment funds. And while the premium services cost a pretty penny, they come with one-time charges, not monthly charges. EquityNet is one of the less elitist equity crowdfunding sites out there, and to that, I’ll tip my cap.

Read our full EquityNet review

Visit the EquityNet website

Fundable

fundable

Founded in 2012 and based in Ohio, Fundable (see our review) is an unusual crowdfunding site in it hosts host both rewards and equity crowdfunding campaigns (though not both simultaneously). Think of it as both a Kickstarter-type platform and an equity crowdfunder. Given the subject of this article, however, I’ll be focusing on the equity side.

Best For…

You can raise funds for just about any type of business endeavor on Fundable. When it comes to choosing a rewards campaign or an equity funding campaign, Fundable states that rewards campaigns “are effective for smaller dollar raises (typically below $50,000)” and goes on to describe the target audience for its equity campaigns:

Equity raises are best for companies looking for larger sums of operating capital to move their business forward. Also, some businesses do not have a developed product or service that they can market through a Rewards raise, so offering equity is their best bet for raising funding.

Products Offered

Fundable is another crowdfunding platform that doesn’t take a percentage of what you raise, but rather charges a flat monthly fee to launch a campaign. Fundable offers two subscription packages:

  • The Standard package costs $179/month and gives you data analytics, email support, a guide for marketing your crowdfunding campaign, and marketing outreach templates.
  • The Premium package is available for a one-time payment of $2499. With this package, Fundable puts you in contact with the accredited investors the company believes will be the most receptive to your pitch. Fundable will also provide a list of relevant media contacts so you can better conduct media outreach for your campaign.

As with the previous two companies discussed, all funds transferred in a Fundable equity campaign are transferred offline. You are therefore free to seek a debt-based funding arrangement (or any other type of funding arrangement).

Requirements

Once you set up your Company Profile in which you detail your company, your proposed campaign, and your funding goals, you’ll have to wait for Fundable to approve your project before you can continue. If you’re approved, you then choose which type of crowdfunding campaign you’d like to run and a subscription package.

How To Apply

Go to Fundable’s website and get started!

Takeaway

Fundable is a flexible crowdfunding platform in terms of what sort of campaign you can launch through the site, and they provide invaluable assistance with media outreach, marketing, and investor contacts at the highest subscription level. Fundable does pre-screen businesses before allowing them to begin fundraising, however, so make sure you have everything in order before you begin the process.

Read our full Fundable review

Visit the Fundable website

AngelList

Founded in 2010 in San Francisco, AngelList is one of the leading equity crowdfunding platforms. It’s the only crowdfunding site that doubles as a job board for job-seekers trying to find a position with a startup. AngelList distinguishes itself by being the rare crowdfunding platform that lets entrepreneurs/startups raise money free of charge. All fees are paid by investors. Pretty cool, huh?

Best For…

Anybody can sign up with AngelList and attempt to raise money from the accredited investors on the site. However, AngelList doesn’t quite provide the guidance for those looking to crowdfund that many other crowdfunding platforms give you. Their website is much more spartan than the competition, with relatively little information for startups as to how you launch your campaign. Be prepared to do some research.

Products Offered

AngelList doesn’t offer any subscription packages with special features. You just sign up with AngelList on the website, and once you’ve completed your profile, you can launch your Title II crowdfunding campaign and get in touch with accredited investors.

Companies using AngelList raise money through investment syndicates. It’s an investment arrangement that differs from that of the other crowdfunding sites I’ve detailed today. Essentially, accredited investors give money to “angel” investors who then invest the pooled money into companies on the platform.

Keep in mind that though you won’t have to pay a monthly charge or a cut of what you raise to AngelList, that doesn’t mean there are no costs associated with running an equity campaign. The process of arranging an equity deal with investor syndicates on AngelList will cost you money due to paperwork, legalities, etc.

Requirements

There are no particular requirements for a company looking to establish a profile on AngelList. Of course, in order to actually raise any money, your plan of action must be formidable enough for AngelList’s syndicates to take an interest in you, so this platform isn’t for just anybody.

How To Apply

Create a startup profile on AngelList’s website and start kissing angel investor butt! (Or use any other technique you find effective)

Takeaway

AngelList is a more freewheeling platform than some of the others discussed here, and the complexities involved in working out deals with investor syndicates may seem daunting to the first-time entrepreneur. However, AngelList has an excellent public reputation and is highly rated by those who have used the platform to conduct equity raises, many of whom have used multiple equity crowdfunding sites.

Visit the AngelList website

WeFunder

wefunder

WeFunder (see our review) differs fundamentally from the other services I’ve mentioned. Every site I’ve mentioned thus far deals in Title II crowdfunding (accredited investors only) and not Title III (anyone can invest). Wefunder, founded in 2012 and based in Cambridge, MA, is the most successful crowdfunding platform to use Title III equity crowdfunding, or Regulation Crowdfunding. In fact, with over $50 million raised thus far, Wefunder comprises 50% of the market share in the Regulation Crowdfunding industry.

Best For…

Of the 174 companies that have been successfully funded through Wefunder, the company states that “Most are alumni of Y Combinator.” That should tell you something about the sort of company to whom Wefunder is best suited. The rare startup with exponential growth potential stands a decent chance of finding funding through the platform. Other businesses may have a tougher time of it. I’ll note that tech and food companies seem to comprise the majority of funded startups on Wefunder.

Only US corporations and LLCs can use Wefunder for crowdfunding.

Products Offered

Wefunder offers the use of its equity crowdfunding platform through which you can raise anywhere from $20,000 to $1,070,000. You’ll have to pay a $195 fee before you can start crowdfunding, and if you’re successful in reaching your funding goal (Wefunder is an all-or-nothing crowdfunding site), Wefunder will take 7% of what you raised as a platform fee. Take that into account when setting your funding goal.

Requirements

There are no particular requirements for joining Wefunder. The company prescreens applicants for fraud and to make sure your startup complies with the rules, but that’s about it.

How To Apply

Go to Wefunder’s website, sign up and fill out your business profile, and wait to hear back from the company.

Takeaway

Wefunder is the industry leader in Regulation Crowdfunding and can take the right kind of high-growth startup to funding success. Regulation Crowdfunding hasn’t yet been the boon some hoped it would be, but Wefunder is one of the few companies thus far to truly make it work.

Read our full Wefunder review

Visit the Wefunder website

SeedInvest

seedinvest

SeedInvest (see our review) was founded in 2012 just as the JOBS Act was being signed into law. In fact, founders Ryan Feit and James Han were part of the movement to get the Act passed in the first place. Like Wefunder, they offer Regulation Crowdfunding, opening up investing to the masses.

Best For…

By their own estimation, SeedInvest has approved only 1% of the companies who have applied to use their platform. SeedInvest is an exclusive platform and they don’t care who knows it. Tech companies seem to dominate the list of offerings on SeedInvest’s site.

I’ll note that while many crowdfunding sites refuse to have anything to do with cannabis-related companies, SeedInvest appears not to be one of them. “Green” startups, take note!

Products Offered

Wefunder offers up the use of its equity crowdfunding platform to the lucky few who survive the vetting process. Per the FAQ, this is what SeedInvest offers to those who get through:

  • Simplify and speed up your fundraising process
  • Access a network of accredited investors from around the world
  • Host virtual fundraising sessions from your desk
  • Streamline investor pitches, execution of legal documents, and processing of investments

Unfortunately, SeedInvest’s fees are complex and depend on your specific offering type:

  • 7.5% placement fee; charged on the total amount raised on SeedInvest in the round, paid only upon the successful completion of your offering.
  • 5% warrant coverage or equity; based on the total amount raised on SeedInvest in the round.
  • Up to $0 – $10,000 in due diligence, escrow, marketing and legal expense reimbursements.

Though the fees are considerable, one advantage of SeedInvest is that you can raise up to $30 million on the platform.

Requirements

SeedInvest doesn’t lay out specific criteria for making it onto its site, but remember that only 1% of applicants survive SeedInvest’s extreme vetting process. You’d better have done your homework!

How To Apply

Go to SeedInvest’s website, sign up for an account, fill out your project information, and wait to see if you’ll be accepted into the 1%.

Takeaway

To state the obvious, SeedInvest isn’t for everybody. Only the startups with the highest growth potential need apply. If this is you, SeedInvest may be worth investigating.

Read our full SeedInvest review

Visit the SeedInvest website

MicroVentures

microventures review

Founded in 2009 and based in Austin, MicroVentures (see our review) is another example of a Regulation Crowdfunding platform. You should know what that is by now if you’ve been paying attention!

MicroVentures states that “(t)he sweet spot for our platform is companies or startups that need $150,000 to $1,000,000 in capital.” Thus far in their lifetime, MicroVentures has facilitated the raising of over $100 million for high-growth startups. Let’s take a closer look at them.

Best For…

According to MicroVentures, the following industries are its main areas of investment:

  • Internet technology
  • Media and entertainment
  • Software
  • Green technology
  • Mobile
  • Social
  • Gaming

MicroVentures goes on to describe the sort of company that best fits the platform:

MicroVentures looks for businesses that have a unique idea or a new spin on an old technology. We review the team, traction, market size and other factors to determine if the company will be a good fit for our platform. Additionally, we believe in accountability to the business (or concept), which is one reason we seek to identify firms whose founders already have invested their own capital in their business.

Products Offered

MicroVentures offers equity crowdfunding with the following fees:

  • $99 application fee
  • $250 due-diligence fee
  • 5% of what you raise

MicroVentures is an all-or-nothing crowdfunding site. If you raise some money but fail to meet your funding goal by the time your campaign ends, you’ll get nothing and like it.

Requirements

MicroVentures doesn’t spell out any specific requirements to meet in order to be approved to start crowdfunding, but they do state the following:

We review every company that is submitted but we are only able to respond to the ones that we think will be successful on our platform. This is less than 5% of the companies that submit so please include as much detail as possible for us to evaluate.

So, 5% of applying businesses get through. That’s better than SeedInvest’s 1%, but it’s still a high bar to clear!

How To Apply

Sign up for a MicroVentures account, fill out the application for an offering, and submit it.

Takeaway

MicroVentures has a solid reputation in the industry. They offered investments in Facebook and Twitter before each went public. For the 5% of startups that, in MicroVentures’s estimation, have that kind of growth potential, this equity funding site holds great promise indeed.

Read our full MicroVentures review

Visit the MicroVentures website

Final Thoughts

Equity crowdfunding has only been around for a few years. Suffice to say, it is a work in progress. If you play your cards right, however, it might be just the thing to take your startup to the next level. If you’ve done your due diligence in preparing your offering and you possess the ability to excite investors, professional and amateur, then it’s certainly an avenue worth exploring.

The post The 7 Best Equity Crowdfunding Sites For Businesses And Entrepreneurs appeared first on Merchant Maverick.

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6 Platforms That Do Crowdfunding For Nonprofits

nonprofit crowdfunding

The crowdfunding industry continues to grow and expand as a means of soliciting donations, product sales, and investment, so it’s only natural that nonprofit organizations are looking to get into the crowdfunding game. In taking advantage of a crowdfunding platform’s fundraising and social media tools, nonprofits can bring their message to a much wider (not to mention younger) swath of the population than would otherwise be possible.

However, it’s not a simple matter of picking from a list of interchangeable platforms and getting started. Not all crowdfunding websites are created equal. Some crowdfunders are purely for creative/business projects and cannot be used for nonprofit fundraising, while other platforms specifically cater to the nonprofit market. Some platforms don’t let you collect the money you raise unless you hit your funding goal amount, while others let you keep whatever you raise regardless. Some platforms charge a percentage of what you raise as a fee (and some charge more if you fall short of your funding goal), while others charge a flat monthly fee to use their services. Some platforms facilitate the giving of rewards to your donors, while others do not.

Point being, your choice of a crowdfunding platform matters. We here at Merchant Maverick want to help you cut through the dizzying array of crowdfunding sites available by highlighting the crowdfunders best suited for nonprofit fundraising.

A Warning Before You Begin

It’s vitally important that you familiarize yourself with the laws regulating nonprofit fundraising in the state or states in which you will be operating. You may well have to register your charitable nonprofit with the state before you begin soliciting donations. If you’re looking to crowdfund for your nonprofit and you’re confronting these questions for the first time, I recommend starting by checking out the information provided by the National Council of Nonprofits and going from there.

It’s easy to find yourself unwittingly running afoul of fundraising laws if you’re unaware of them, so take caution!

1. GoFundMe

GoFundMe (see our review) is best known for hosting campaigns related to personal medical expenses and other tragedies. That’s what has propelled GoFundMe to become the world’s top crowdfunding platform in terms of dollars raised (more than 5 billion and counting). What’s less well known is that GoFundMe hosts nonprofit crowdfunding campaigns as well. On the subject of nonprofit campaigns (referred to as Certified Charity campaigns), GoFundMe states the following:

Certified Charity campaigns can be created by anyone, whether you’re a good samaritan wanting to support your favorite charity or an employee of a non-profit. A ‘Certified Charity‘ badge will appear on the campaign to give your cause an extra layer of verification.

Donations made to Charity campaigns are processed through PayPal Giving Fund, a 501(c)3 public charity (Federal Tax ID: 45-0931286). The Campaign Organizer doesn’t have to touch the money at all, and donors will automatically receive a tax-deductible receipt.

In order to launch a Certified Charity campaign, the outfit you’re fundraising for must be a 501(c)(3) US-based nonprofit organization. It must also be registered in PayPal Giving Fund’s database. If your 501(c)(3) nonprofit isn’t in this database, GoFundMe outlines how you can rectify that here. And if your nonprofit is based outside the US, GoFundMe asks you to contact them to discuss your options.

GoFundMe’s Certified Charity campaigns carry with them a 5% platform fee on the money raised. While GoFundMe eliminated their 5% platform fee for their US-based personal campaigns in late 2017 (and has subsequently expanded that policy to Canada and the UK), the platform fee still applies to nonprofit campaigns. Now, given the current trend in crowdfunding (and with GoFundMe in particular), I wouldn’t be surprised if GoFundMe eliminated the platform fee for its Certified Charity campaigns sometime in the future. For now, however, the 5% platform fee remains.

In addition to the platform fee, a 2.9% + $0.30 processing fee will apply to each donation made. Therefore, a total fee of 7.9% + $0.30 will be taken from each donation.

GoFundMe provides the following primer for those interested in starting a crowdfunding campaign for a nonprofit organization. Check out our full GoFundMe review for more information.

2. YouCaring

YouCaring is another crowdfunding site specializing in personal and charitable fundraising campaigns. Having facilitated over $900 million in donations since its founding in 2011 — and having recently acquired Indiegogo’s charitable crowdfunding spinoff Generosity — YouCaring’s profile is rising as a cause-oriented crowdfunding platform. Thankfully for you, they host nonprofit crowdfunding campaigns as well as campaigns for individuals.

YouCaring has one big advantage going for it vis-à-vis GoFundMe. Unlike their larger competitor, YouCaring charges no platform fees to the crowdfunding campaigns it hosts, including nonprofit campaigns. That’s 5% more funds going to your charity — not too shabby. Just keep in mind that you’ll still be paying 2.9% + $0.30 per transaction to the payment processor. You can use PayPal (see our review) or WePay (see our review) for payment processing, though YouCaring recommends WePay.

One drawback of using YouCaring compared to GoFundMe, however, is the fact that with YouCaring, your donors won’t automatically get tax-deductible receipts. The nonprofit in question will have to do this themselves by collecting their donors’ contact information through YouCaring.

While YouCaring doesn’t have as much nonprofit-specific information on their site as does GoFundMe, they do include this guide for setting up a WePay account under your nonprofit organization.

3. Razoo

Since its founding in 2006, Razoo (see our review) has been something of an all-of-the-above crowdfunder, hosting crowdfunding campaigns for nearly any cause under the sun: business crowdfunding, personal crowdfunding, team crowdfunding, and, yes, nonprofit crowdfunding. Recently, however, they seem to be paying special attention to capturing more of the nonprofit crowdfunding market.

In order for your nonprofit to directly raise funds on Razoo, it needs to be registered as a 501(c)(3) public charity in the US. However, if your organization doesn’t yet have 501(c)(3) status or is based outside the US, you may still be able to use Razoo for fundraising. To do this, you’ll need to find an organization willing to act as your fiscal sponsor. Razoo provides information as to how to do this here.

Razoo charges a standard nonprofit crowdfunding campaign 4% off the top as a fee, with an additional 2.9% + $0.30 per donation going to the payment processor. A standard Razoo nonprofit campaign will be paying slightly less in fees than a GoFundMe campaign. However, Razoo has recently unveiled a new feature exclusively for nonprofits: premium subscription plans that eliminate the 4% Razoo transaction fee and give your nonprofit unique fundraising software through which your organization can run a totally branded crowdfunding campaign.

Here are Razoo’s three nonprofit premium plans and their respective details:

Plus

  • $99/month, billed annually
  • No platform fees
  • Unlimited P2P & Team pages
  • Priority support
  • Donor analytics
  • Advanced CRM tools
  • Donor data collection
  • Data Connect integration
  • Branded donation page, donation receipts, and donation widget
  • Volunteer management

Pro

  • $249/month, billed annually
  • All of the above, PLUS:
  • Pro CRM tools
  • Advanced donor data collection
  • Email messaging
  • Branded P2P fundraising
  • Advanced white label controls
  • Custom subdomain

Enterprise

  • Contact Razoo for pricing
  • All of the above, PLUS:
  • Domain masking
  • Custom events
  • Dedicated project manager
  • Fundraising coaching

These aren’t cheap packages, so if you’re considering going this route, it’s best if you have some experience with nonprofit fundraising and have a reasonable expectation of funding success. If you do, these premium nonprofit packages offer a pretty compelling deal. Your organization will be able to host its own crowdfunding campaign — one operating under its own brand, not that of Razoo. Plus, you’ll have access to the advanced campaign features listed above.

Donors who contribute to nonprofit campaigns will immediately be emailed a receipt which can be used to claim a deduction on their taxes.

Read our full Razoo review to learn more.

4. FundRazr

fundrazr

Declaring themselves “Canada’s leading crowdfunding platform”, FundRazr (see our review) has facilitated the raising of over $116 million USD in their near-decade of existence. FundRazr hosts crowdfunding campaigns for personal causes, business causes, and, yes, nonprofit organizations. The company also has a great reputation among both campaigners and donors. In fact, FundRazr is one of the few crowdfunding outfits that proudly links to its Trustpilot page. That should tell you something.

FundRazr goes into exactly who can raise money on their site for a nonprofit organization here. Essentially, if you’re not an Authorized Officer of the organization in question, you’ll need to submit a Letter Of Subordination that expressly authorizes you to fundraise on behalf of the organization.

A nonprofit fundraising campaign on FundRazr will have to contend with fees equal to those of GoFundMe. There’s a 5% platform fee and a 2.9% + $0.30 payment processing fee. Sorry!

FundRazr doesn’t give a great deal of guidance for nonprofits looking to use their platform, so if you represent a nonprofit, you’ll want to get in touch with the company to iron out the details. One thing I can tell you, however, is that PayPal and WePay (available in the US, UK, and Canada only) are your options for payment processing.

Read our FundRazr review to get the full story.

5. CrowdRise

For most of its existence, following its founding in 2010, CrowdRise was a crowdfunding platform for both personal causes and charity/nonprofit fundraising. However, in early 2017, CrowdRise was acquired by GoFundMe. CrowdRise now directs all would-be personal campaigners to GoFundMe while focusing solely on crowdfunding for nonprofit organizations.

CrowdRise details the following requirements for using their services:

In order to become a CrowdRise nonprofit, [an organization] must first be a registered 501c3 in good standing with the IRS or a Canadian charity in good standing with the CRA, and have a valid listing on GuideStar (US) or Canada.Ca (Canada).

CrowdRise is somewhat similar to Razoo in that you can set up a crowdfunding campaign for free and pay a transaction fee on what you raise or you can spring for a paid subscription that reduces (or eliminates) the transaction fee and gives you access to special fundraising features. Here are the details on CrowdRise’s offerings:

Starter (the free-to-start no-subscription package)

  • 6% platform fee, 2.9% + $0.30 payment processing fee
  • Essential fundraising tools
  • Two active campaigns
  • Registration integrations
  • Recurring donations
  • Basic campaign theming
  • Email support
  • On-demand training resources

Premium

  • Contact CrowdRise for subscription pricing
  • 3% platform fee, 2.9% + $0.30 payment processing fee
  • All of the above, PLUS:
  • Unlimited active campaign pages
  • Custom branded URLs
  • Registration and ticketing
  • Custom transactional emails
  • Configurable donate forms
  • Text-to-donate
  • API access
  • Google Analytics integration
  • Salesforce integration
  • Fundraising minimums
  • Phone support with 24-hour response time
  • Success strategist and annual review
  • Live, web-based setup and training

Enterprise

  • Contact CrowdRise for subscription pricing and fees
  • All of the above, PLUS:
  • Complex campaign structure
  • Parent/child level campaigns
  • Adjustable donor fees
  • Phone support with 4-hour response time
  • Premier account management
  • Live setup, training and success planning
  • Success resources w/ live assistance
  • Quarterly success review

It’s unfortunate that CrowdRise doesn’t just list the pricing for premium plans on the website. Still, you get the idea. Pay a monthly fee, and you’ll get the platform fee reduced and gain access to special features you can employ in the course of your crowdfunding campaign.

At first glance, CrowdRise’s standard nonprofit crowdfunding campaigns don’t look too appealing, what with that 6% platform fee and the payment processing fees. However, when a donor pledges to a campaign on CrowdRise, they’re given the chance to cover these fees themselves — and, according to CrowdRise, most donors do just that. CrowdRise states that on average, 98% of funds donated to causes go to the campaigner due to this policy. If true, this is a very competitive rate indeed!

6. FirstGiving

FirstGiving is a fundraising platform wholly devoted to nonprofit crowdfunding. It’s somewhat similar in structure to CrowdRise in that you can fundraise for a nonprofit freely without a subscription or get a subscription which gives you access to more advanced features.

According to FirstGiving:

All donations made through FirstGiving are processed through our charity partner Global Impact, a 501c3 nonprofit, and are fully tax-deductible to the full extent of the law.

No word on whether donors get sent a tax-deductible receipt or not.

Without a subscription, one can launch a crowdfunding campaign for “any of the 1.5 million nonprofits in the US” A “performance fee” of 5% and a credit card processing fee of 2.5% apply to what you receive; however, as with CrowdRise, donors are given the option of covering these fees when they donate, and FirstGiving estimates that 45% of donors do so.

As for the paid subscription packages, here’s what FirstGiving has to offer. Unfortunately, you’ll have to contact FirstGiving to get pricing estimates.

FirstGiving Pro

  • For small- to medium-sized nonprofits
  • Branded fundraising pages
  • P2P and event registration
  • Event management
  • Corporate gift matching
  • Comprehensive reporting
  • GiftWorks Cloud integration

Artez Enterprise

  • For large nonprofits
  • Fully customized fundraising and event pages
  • Built-in coaching tips
  • Predictive suggested donation amounts
  • Mobile optimized donation forms
  • Monthly giving programs

A Note Regarding Indiegogo

If you’ve cruised the internet looking for crowdfunding platforms that cater to nonprofits, you’ve probably seen Indiegogo (see our review) listed as one such platform. However, this was before Indiegogo sold its charitable crowdfunding division, Generosity, to YouCaring. As of March 2018, you can no longer launch a nonprofit crowdfunding campaign with Indiegogo.

Final Thoughts

Crowdfunding for nonprofits isn’t as straightforward as crowdfunding for a business or for a personal cause. Thankfully, modern crowdfunding platforms make it easier than ever to navigate the legal complexities to help nonprofits raise money, whether you’re an officer of the nonprofit or not. Just be careful and make sure you’re doing everything by the book!

The post 6 Platforms That Do Crowdfunding For Nonprofits appeared first on Merchant Maverick.

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The Best Specialty Crowdfunding Sites

specialty crowdfunding

By now, if you keep up with developments in the business world (or if you’ve had to raise funds for a loved one in need), you’re likely familiar with crowdfunding giants like Kickstarter (see our review), Indiegogo (see our review), Patreon (see our review), and GoFundMe (see our review). The biggest crowdfunding platforms also tend to have the most marketing resources at their disposal, so it’s little wonder if you’ve heard of them and not their smaller competitors.

Big crowdfunders have their places, but it’s high time some of smaller, more specialized crowdfunding sites out there got a little attention. Many such platforms are aimed at a particular slice of the crowdfunding market and may be better suited to your particular cause than some of the more general-purpose crowdfunders.

Let’s explore some of the specialty crowdfunding sites that can help you raise money for your distinct needs.

Small Business & Startup Crowdfunding

Fundable

fundable

Fundable (see our review) is a business crowdfunding platform with a particular appeal to small businesses and startups that have exponential growth potential. With Fundable, a company can launch a rewards crowdfunding campaign or an equity crowdfunding campaign…or even both!

Fundable won’t let you run a rewards campaign and an equity campaign simultaneously, but if you play your cards right, you can use a successful rewards campaign to demonstrate the strength of your startup to investors and begin a successful equity campaign. (Read my article on the differences between equity crowdfunding and “traditional” crowdfunding for more information.)

Fundable is more exclusive than many other crowdfunding platforms and must approve your Company Profile after you’ve finished filling out your company information on their site.

Fundable doesn’t charge a percentage of what you raise as a fee, departing from the practice of such crowdfunding platforms as Kickstarter and Patreon, which charge 5% each. Instead, Fundable charges a flat rate of $179/month. For the underresourced startup, this monthly fee is a substantial barrier to entry — particularly as the fee must be paid regardless of whether your campaign is successful. For the small business that expects success, however, this fee policy can be a boon. Consider the startup that successfully raises $50K in a 60-day campaign. $358 is a lot less than $2,500 (5% of $50K)!

You will, however, have to contend with payment processing fees. For its rewards campaigns, Fundable takes 3.5% + $0.30 of each transaction to cover payment processing. There are no such fees associated with Fundable’s equity campaigns because those campaigns do not involve online payment transfers — all payments are made offline.

Like Kickstarter, Fundable has an all-or-nothing funding policy. If you don’t reach your funding goal by the time your campaign ends, you don’t get anything. Something to keep in mind!

Wefunder

wefunder

Wefunder (see our review) is another crowdfunding platform that specializes in business funding. Unlike Fundable, it is exclusively an equity crowdfunding site. And while Fundable’s equity campaigns only allow you to fundraise from accredited investors (a term that essentially refers to rich people), Wefunder’s equity campaigns take advantage of Title III of the Jobs Act of 2012 to offer equity crowdfunding for non-accredited investors (often referred to as Regulation Crowdfunding). What this means is that Wefunder lets you raise equity from anybody and everybody, just as you can raise money from anyone with rewards crowdfunding.

Wefunder is the largest Regulation Crowdfunding platform in existence, currently comprising 50% of the market share.

Wefunder takes a more relaxed approach to letting companies use their platform than does Fundable. Wefunder doesn’t do any prescreening, so there’s no initial bar to clear. Once you’ve started, Wefunder charges an initial non-recurring fee of $195 to launch your funding campaign. They then charge, in their words, “up to a 7% fee” of what your raise in a successful campaign. Conducting a Regulation Crowdfunding raise with Wefunder means accepting this relatively onerous fee policy. Payment processing fees are paid by the investors.

Like Fundable, Wefunder’s crowdfunding campaigns employ the all-or-nothing funding model, so if you take your business fundraising idea to Wefunder, you’d better have a detailed plan of action and the means to follow through on it. If your campaign doesn’t live up to its billing and you don’t reach your goal, no funding for you.

Medical Crowdfunding

When it comes to crowdfunding to pay for medical expenses, GoFundMe receives the lion’s share of attention. A recent NerdWallet study found that $930 million of the $2 billion raised on GoFundMe during the time period studied went towards medical campaigns. However, as I documented in my GoFundMe review, quite a few campaigners have had serious issues with the company and its practices. Let’s take a look at some GoFundMe alternatives for those Americans (curiously enough, it’s just about always Americans) seeking to crowdfund their medical expenses or those of a loved one.

YouCaring

Of all the crowdfunding platforms focused on human need, YouCaring is probably the most well-known of the non-GoFundMe crowdfunders. How does YouCaring stack up?

GoFundMe recently garnered some good press by eliminating its 5% platform fee for campaigns based in the US and Canada. YouCaring does them one better: Its campaigns have no platform fees no matter where the campaigner is based. Both platforms do, however, take 2.9% + $0.30 out of each donation to cover the cost of payment processing while asking donors to voluntarily contribute money to the platform to help keep it going.

One thing that comes across when perusing user reviews of YouCaring is that its customer service is second to none — the level of responsiveness described is unusual for a crowdfunding site. YouCaring offers real-time chat support and personalized coaching that helps guide users through the crowdfunding process.

YouCaring has facilitated the raising of $900 million since its founding in 2011, so it has an established track record of success. The site is definitely worth exploring if you or someone close to you needs help with medical expenses.

GoGetFunding

GoGetFunding is another crowdfunding platform focused on personal crises like medical episodes (though they let you crowdfund for any and all causes). You can raise funds in 23 currencies with GoGetFunding.

In one respect, however, GoGetFunding has fallen a bit behind the times. In its FAQ, GoGetFunding proclaims that its platform fee of 4% is “lower than all of our major competitors.” Now, this may have been true when written, but it is no longer true. If you take a trip down memory lane, you’ll recall that I mentioned that YouCaring and GoFundMe have no platform fees. (With all due respect to GoGetFunding, 4% is not lower than 0%.)

Beyond the 4% platform fee, 2.9% + $0.25-$0.30 per transaction is taken by the payment processor — roughly the same payment processing fees as GoFundMe and YouCaring.

Anyone choosing GoGetFunding over its immediate competitors is accepting the 4% fee, so let’s see what you get for that money. GoGetFunding lets you add team members to your crowdfunding campaign if you want to make your campaign a team effort. You also get PayPal support, a personal fundraising coach, and PR to help promote your campaign to the media.

Crowdfunding For Filmmakers

Seed&Spark

Seed&Spark is a crowdfunding platform devoted to funding the production of movies and shows. Not only that, but the rate of funding success for Seed&Spark projects is 75%, which (Seed&Spark claims) beats all other competitors in this particular field — a claim that seems to have been corroborated by a blogger.

Seed&Spark’s fee policy is unique in the industry. Seed&Spark takes 5% of donations — the same rate as Kickstarter — but offers backers the chance to cover that fee at checkout. According to Seed&Spark, a majority of backers do so. In addition, the platform charges 2.9% + $0.30 for payment processing (same as most competitors). Combine this with the fact that, according to Seed&Spark, filmmakers take home an average of 95% of what they raise, and it appears the average platform fee paid by Seed&Spark creators is 2% — not bad at all for a non-personal crowdfunder!

Seed&Spark’s funding model is a hybrid of the all-or-nothing approach favored by Kickstarter and the keep-what-you-raise approach adopted by other crowdfunders. With Seed&Spark, you get to keep what you raise only after reaching 80% of your funding goal.

Once you’ve had a successful campaign and you actually complete your movie or show, you can even choose to have it distributed by Seed&Spark. If you do, the revenue will be split 60/40, with the creator getting 60%. Subscribers to Seed&Spark will then be able to stream your movie or show at seedandspark.com as well as on Apple TV and Roku through Seed&Spark’s app.

Slated

Slated is an equity crowdfunding platform devoted to movie production. Launch a Slated project and you’ll be marketing your film concept to a select crowd of accredited investors, many of whom work in the film industry (producers, writers, directors, actors, etc.). In fact, according to Slated, 68% of the films appearing at Sundance in 2016 and 54% of 2016’s Oscar-nominated films were made by Slated members. Using Slated is a way to get exposure for your project among the very people in the industry who matter.

With Slated, all funds are transferred offline — not great for convenience, but it means you won’t be paying any fees on what you earn.

The platform is free to use, but if you want any real likelihood of meeting your goal, you’ll want to use Slated Analytics’ Script Analysis service. Use this service and three Slated members — industry insiders with experience doing exactly this — will pore over your script and assess its screen-worthiness. Only one of the three pros who read your script has to give it a passing grade for it to earn an official recommendation. Your score will prove vital to your ability to attract investors and secure funding. The script analysis costs $395 per draft, while the combined script and financial analysis package will set you back $995.

Crowdfunding For Musicians

PledgeMusic

PledgeMusic is a crowdfunding platform for musicians. It gives bands and other performers the ability to get their music funded, connect with their fans, and offer exclusive content. According to PledgeMusic’s FAQ:

“You can run a project around your new album or EP, a book, a DVD, a concert tour…anything you’re doing, as long as it’s centered around music!”

In addition to being a crowdfunding platform, PledgeMusic also hosts your music. This may explain why PledgeMusic takes a sizable 15% cut of what you raise in a successful campaign (thankfully, you won’t have to cover the payment processing costs). Furthermore, PledgeMusic is an all-or-nothing crowdfunder. You’ve got to hit your funding goal before you receive anything.

PledgeMusic will work with you in designing your campaign and in tweaking the look of your store page. The platform is designed to allow you to offer both digital downloads (tracks, albums, etc.) and physical products like instruments, backstage passes, and swag.

ArtistShare

ArtistShare is a crowdfunding platform so old that it predates the term “crowdfunding.” Founded in 2001 and launched in 2003, ArtistShare was the first “fan-funding” site for creative artists.

ArtistShare is much more of an exclusive club than the other crowdfunding sites I’ve covered in this article. The company must pre-approve you before you can raise funds on the site, and judging by the artists on the platform, ArtistShare favors polished jazz and classical musicians.

ArtistShare takes 5% of what you raise in fees. They take an additional 3-5% for payment processing fees.

ArtistShare’s funding model isn’t quite all-or-nothing and it isn’t quite keep-what-you-raise either. With ArtistShare, if you don’t hit your funding goal, you will only receive funds from backers who clicked the “Unconditional Support” option when making their contribution. Thus, if your project doesn’t reach its goal, you’ll still get some funding, but you won’t get everything that was pledged.

Final Thoughts

If crowdfunding makes sense for your particular situation, there’s no reason you have to follow the herd and go with the big boys. There are plenty of specialty crowdfunding sites out there, only a few of which I’ve covered here. You may find that a niche crowdfunding site can offer you particular benefits — benefits you might not get with a more general-purpose crowdfunder.

The post The Best Specialty Crowdfunding Sites appeared first on Merchant Maverick.

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8 Ways To Finance Your Small Business

Business financing is often a necessary part of growing a business, but when it comes to finding capital, it can be difficult to know where to start. Should you get a credit card? What about a loan from your local bank? Is there useful financing out there that you haven’t even heard of?

Read on, and we’ll point you in the right direction. This article discusses the most common (and some less common) ways of getting financing for your business. And, if you find the right type of financing for your business, we’ll give you the next steps to continue your search.

Want help finding a business loan? Apply now to Merchant Maverick’s Community of Lenders. We’ve partnered with banks, credit unions, and other financiers across the country to bring you fast and easy business financing.

1. Business Loans

As you might expect, business loans are one of the most popular and versatile ways of financing your business. Most businesses will qualify for a business loan of one sort or another, and they can be used for many business purposes, from working capital to business expansion to refinancing.

Business loans come from many different places. While everybody knows that you can get a business loan from a bank, you might not be aware that other financial institutions offer business loans. Many offer loans that are easier to qualify for and have faster applications than bank loans. Here are places that commonly offer business loans:

  • Banks and credit unions offer business loans and other types of financing.
  • Nonprofits, not-for-profit institutions, and microlenders offer small business loans and other types of financing to create jobs and fuel community growth.
  • The Small Business Administration partners with financial institutions to offer business loans. Read more about SBA loans in our guide to their programs.
  • Online lenders, also called “alternative lenders,” offer business loans and other types of financing with fast, semi- or fully-automated application processes.

Loans come in many different forms. The most common are installment loans, in which the money is granted to the business in one lump sum and then repaid via incremental, fixed, payments. However, some loans might have special fee and repayment structures — you might find loans with fixed fees (like short-term loans), loans that have repayment rates based on the percentage of money you make every day or month, or other arrangements. In other words, with a little looking, most merchants will be able to find something that is suited to the needs of their business.

For more information on small business loans, check out our free Beginner’s Guide to Small Business Loans. Or, to read reviews of individual lenders, head over to our small business loans review category.

2. Business Lines Of Credit

Business lines of credit are a sort of hybrid between business loans and credit cards. Like business loans, with a line of credit, you can borrow a sum of money which is (normally) repaid along with interest in installments over a set period of time. Like credit cards, you can request funds at any time, up to your available credit limit.

If you occasionally need funds to make ends meet or grow your business, or you simply want a safety net in case of emergencies, a line of credit is an excellent tool at your disposal.

Credit lines can be especially useful to businesses on a timeline because you don’t need to apply every time you need to borrow funds. When you are approved for a credit line, you’re granted access to a certain amount of money from which you can draw at any time. If you have a revolving line of credit, the amount you can borrow will replenish as you repay outstanding debts.

Some credit lines, such as asset-backed lines of credit, can work a little differently. If you have access to a credit line secured by unpaid invoices, inventory, or other assets, the amount you can draw at any given time will depend on the value of the assets you have outstanding. These credit lines are normally best for B2B businesses.

Credit lines carry a few drawbacks — most credit lines have variable interest rates, which mean that your rates might change without notice. And, if you aren’t very good at managing money, you might find that you don’t have emergency funds when you need them. However, lines of credit are useful tools for many businesses.

In the past, it was difficult for all but the most well-established and prosperous businesses to get credit lines. With the advent of online loans, it’s becoming easier for businesses of all sizes to access this useful financing tool. Check out our guide to business lines of credit for more information, or, if you’re interested in procuring one, take a look at our favorite line of credit services.

3. Business Credit Cards

There are many reasons to get a business credit card for your business.

For starters, most credit card issuers offer rewards and benefits to merchants who have signed on with their services. By using the card, you could be earning savings in the form of cash back points (that can be redeemed for travel or other expenses). These rewards add up in the long run, and you might be able to save your business quite a bit of money. Additionally, many credit card issuers offer benefits to cardholders, such as extended warranty, price protection, roadside assistance, and other perks.

Credit cards are also convenient ways to keep track of expenses and smooth out cash flow. If you put all your purchases on your credit card, you can easily see what you’ve been spending money on and where you might be able to cut costs. Because the money isn’t coming out of your own account right away, you can defer payments until a more convenient date. You don’t have to struggle to come up with money for expenses if you don’t have it at the moment, or it would be more convenient to pay later.

Of course, credit cards do have some downsides: the APRs can be expensive, so if you don’t pay your bills in time you could wind up with hefty fees that can be difficult to pay off. Additionally, some credit cards carry extra fees, like annual fees and balance transfer fees, which could eat into the money you save by using the card in the first place. However, if you are good at managing money, and spend time choosing a card that will maximize your savings based on how much you plan to utilize the card, credit cards can be excellent tools for many businesses.

Interested in getting a business credit card? Check out a list of our favorite business credit cards. Or, if you are starting a business, you might be interested in our favorite personal credit cards that can be used for business.

4. Merchant Cash Advances

If you need a one-time amount of funds, it might be worth considering a merchant cash advance. This type of financing can be useful for B2C businesses with strong daily sales.

In practice, merchant cash advances are similar to business loans, with the exception of how they’re repaid. Cash advances are repaid by deducting a small percentage of your daily sales; the amount you are repaying each day will vary along with your cash flow. These financial products don’t have a set repayment date, but are normally repaid in a year or less.

Merchant cash advances are an excellent tool for B2C businesses that need a small infusion of cash for working capital, business growth, or other reasons. Know, however, that cash advances have a few downsides: they can be very expensive, and the cost might not be immediately apparent because the fee structure is different than a traditional loan. Instead of interest, cash advance fees are calculated using a factor rate, which can obscure the true cost of the advance.

Head over to our comprehensive article on merchant cash advances for more information, or take a look at our reviews of merchant cash advance providers if you’re interested in finding an advance.

5. Personal Loans

While business loans are based on the credibility and strength of your business, personal loans are based on your personal creditworthiness and financial health. For this reason, these loans can be useful for entrepreneurs, startups, and other businesses that don’t yet have a credit history. You’ll want to give this option a pass if you have separated your business and personal finances, but if you’re not there yet, a personal loan can help you get your business up and going.

Personal loans are normally available from banks, credit unions, and online lenders. You’ll have to have a steady source of income, a solid debt-to-income ratio, and fair credit to qualify for reasonable rates.

Take a look at our guide to personal loans for business for more information, or check out our startup business loan reviews for reviews on personal lenders.

6. Crowdfunding

Rising to prominence due to the internet and some changes in legislature, crowdfunding allows you to finance your business via a network of your peers.

Crowdfunding is normally used by entrepreneurs to get a startup off the ground, or by creators who need money to fund a product. In a crowdfunding arrangement, the entrepreneur creates a campaign, which usually includes a description of their business or product, information about the founders and their partners, a rough timeline, potential problems, and other frequently asked questions.

Perhaps the most well-known type of crowdfunding, popularized by services such as Kickstarter (read our review) and Indiegogo (read our review), is rewards crowdfunding. You may not be aware that there are actually quite a few different type of crowdfunding available:

  • Rewards crowdfunding, from services like Kickstarter and Indiegogo, allows contributors to receive products in exchange for backing the business or project.
  • Donation crowdfunding, on sites like Razoo (read our review), involves funds that are donated to your cause. This type of crowdfunding is typically only used for nonprofits or other charitable projects.
  • Debt crowdfunding, from services such as Kiva U.S. (read our review), works similarly to a business loan — backers contribute money with the expectation that it will be paid back, normally with interest.
  • Equity crowdfunding, from company’s like Fundable (read our review), works when backers contribute money in exchange for equity in your business.

Between all the different types available, most entrepreneurs should be able to find a type of crowdfunding that will suit their business or project. Some less-than-sexy businesses, however, might find that they have trouble appealing to casual investors. While debt and equity crowdfunding — which tends to attract more serious backers — might solve that problem, some businesses might still need to look at other financing options.

Crowdfunding also tends to take a long time. Typically, the entrepreneur has to create a campaign and enter into a one- to three-month funding period. The funding period might require a fair amount of marketing, networking, communicating with current and potential backers, and other work to get your project funded.

Interested in crowdfunding? Head over to our startup business loans review category to read reviews of crowdfunding services.

7. Invoice Factoring

Invoice factoring is a financial solution for B2B businesses that invoice their customers. If you have cash flow struggles due to slow-paying customers, invoice factoring is a potential solution. Factoring is commonly used in industries such as construction, manufacturing, printing, and other B2B businesses.

Invoice factors purchase your unpaid invoices at a discount. While you’ll have to take a bit of a loss, invoice factoring can get you the money you need, when you need it, to keep your business going.

When you sell an invoice to a factoring company, you will receive most of the money up-front, and the factor will place a small amount on reserve. Then, when your customer pays the invoice, the funds are diverted to the factoring company, and you will receive the rest of the money in the reserve, minus the invoice factor’s fee.

There are many invoice factoring arrangements, depending on the factoring company and the needs of your business. You can find factors that require you to sell a lot of invoices or ones that let you pick and choose more carefully. Some factors require that your customers know about the arrangement, while others will keep it a secret, and so on.

Invoice factoring has gotten a bad rap in the past because some factoring companies employed poor practices, such as failing to disclose extra fees, requiring long-term contracts and monthly minimums, and other reasons. However, if you do your due diligence, you will be able to find an invoice factor that suits your business’s needs without employing poor tactics. Check out our Basic Introduction To Invoice Factoring to learn what to look for, and take a look at our comprehensive invoice factoring reviews to learn about individual factors.

8. Equipment Financing

If you run a business that relies on computers, manufacturing equipment, restaurant equipment, vehicles, or other equipment that might be difficult to pay for out of your business’s own pocket, equipment financing might be right for you.

Equipment financing covers two types of financing: equipment loans and equipment leases.

Equipment loans are similar to traditional business loans, but the equipment is generally used as collateral. In a typical equipment loan arrangement, the lender will cover 80% to 90% of the equipment, and you will be responsible for paying the other 10% to 20%.

Equipment leases are arrangements in which you rent the equipment for a certain period of time. In practice, some lease arrangements are similar to loans, because you have the opportunity to buy the equipment at the end of the leading period, but other arrangements are designed so that you can return or trade in the equipment after a certain period of time. Because you don’t have to purchase the equipment, leases can be a good option for businesses that only need equipment for a short time, or frequently need to upgrade expensive equipment (like computers) due to changes in technology.

Equipment financing, especially equipment loans, will most likely be more expensive in the long run than purchasing the equipment outright. However, if you can’t afford what you need, an equipment loan or lease is an excellent way to get financing.

Head over to What Is Equipment Financing? to learn more about this type of financing, or our equipment financing review category to learn about individual financiers.

Final Thoughts

Business owners have many financing tools at their disposal, but finding the right tool for the job can take some work. The above resources will point you in the right direction.

Need some more help? Merchant Maverick’s Community of Lenders is there for you. We’ve teamed up with banks, credit unions, and other financiers across the country to provide our readers with fast and easy business financing. With one short application, you can check your eligibility for all participating financial institutions. Read more about the service, including a step-by-step guide through the application process, in Mirador Finance & Merchant Maverick: Making Small Business Loans Easier.

The post 8 Ways To Finance Your Small Business appeared first on Merchant Maverick.

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