Crowdfunding platforms like Kickstarter and IndieGogo have become popular with modern entrepreneurs. It gives them access to a potentially large pool of funds for their businesses. And there have been a huge number of success stories of crowdfunded products all over the world.
You may be thinking crowdfunding is the way to go. Is it really better than borrowing from even the best licensed money lender Singapore? Once you see these four disadvantages, though, you may change your mind.
You won’t get money upfront
You’ll have to wait for the funding period to end before you get your money. That will take some time. You may not have the luxury to wait that long if you need immediate funds to start your business.
Also, some crowdfunding platforms have an ‘all or nothing’ funding model. This means you will only get the money if your crowdfunding campaign hits its funding goal. If you do not hit that goal, you get nothing. That’s even worse for anyone wanting to get their business idea going.
Contrast that to business loans, which give you the money right away. The only thing you need is to be qualified for the loan.
Crowdfunding is not always reliable
As mentioned above, it’s possible for your crowdfunding campaign to fall short of its goal. With that, you may not get enough money to get your business idea off the ground.
Loans, on the other hand, always lend you the amount of money you ask for. If you planned it well, the loan should be enough for you to launch your business.
Funders will have a say in the direction of your business
In crowdfunding, you are accountable to the people who fund your product. That means you will have to adjust to their requests. This way, your funders have a lot of influence on your product and on your business as well. If you refuse to accommodate your funders’ requests, they may choose not to fund your product anymore.
With loans, the lender has no say in how you run your business. The lender’s only responsibility is to give you the amount of money you asked for as a loan. After that, the only thing they can do is ask you to pay back what you owe. They cannot tell you to modify your product or change the way you do business.
It’s not for the long term
Crowdfunding is only effective for launching your product. It’s no good for the long-term financial needs of your business. In particular, crowdfunding is not suitable for expansion.
Loans are more useful in helping provide the long-term financial needs of your business. For example, you can take out a loan any time your business needs some extra cash. This can be for any purpose, from filling in for a lean sales season to expanding your business overseas.
Conclusion
Crowdfunding may be a popular funding model for many entrepreneurs, but it is not a replacement for loans. These four disadvantages of crowdfunding tell you why loans are still more helpful in many aspects of your business.
With that, don’t be afraid to take out loans for your business. As long as your business remains profitable, you will make more than enough to both pay off the loan and keep earning afterwards. Your business is an asset. Using loans to build it up is good debt.