As many people are aware, there are two distinct types of Crowdfunding: equity-based and non-equity. Equity-based Crowdfunding is generally described as a fundraiser in which the supporters, often referred to as angels, give money to the startup company in return for shares of its ownership.
This type of Crowdfunding typically offers start-up companies access to a significant amount of capital, at relatively low risk. It can offer much higher rates of return than more traditional fundraising methods such as grants from government agencies and foundations, small business loans from banks, and venture capital from venture capitalists.
Non-equity-based Crowdfunding methods include many different options for raising funds for small businesses. These can include sales of product or service warranties and other physical products such as software and peripherals.
Other tangible items like office furniture and office equipment are also commonly used as collateral for these programs. In addition, many companies offer intellectual property as collateral to raise money for their ventures.
The general idea behind this type of alternative financing is to provide start-up companies with access to resources and capital that they would not normally have available to them. Some examples of intangible assets that can be collateral for alternative funding group include patents, copyrights, trade names, business ideas, and business systems.
Many angel investors and venture capitalists specialize in providing small businesses with start-up capital, and they can provide both equity and factoring options. Factoring is a financing method that allows small businesses to obtain cash based on the fact that they have already secured loans with another company.
In factoring, transactions are often arranged between two companies, each of which holds a mortgage on the other’s future project. The mortgage is then used as a means of creating an interest-bearing loan that can be used for capital expenditures and other business expenses. In factoring transactions usually require that business owners pay a down payment and set aside a certain amount of funds as collateral.
Small businesses may also use cash advance programs to acquire working capital. Working capital funding is usually provided by non-traditional financial institutions such as credit unions and banks. Some small businesses use their working capital advances to pay off debt. In some cases, working capital advances may also be used to obtain credit for advertising, growing inventory, or shortening manufacturing processes.
As alternative financing services become more prevalent and more readily available, many small businesses are turning to a host of new funding sources to meet their short-term needs. Many small businesses are now experiencing the benefits of working with professional factoring firms. Factoring firms can assist small businesses in several ways.
Businesses often receive quotes from factoring firms that give them a wide range of financing options, depending on their creditworthiness and current cash flow situation. Businesses can also choose to secure additional lines of credit from these companies if they feel they need quick funding.