ipl-logo

Why Do Entrepreneurs Are Likely To Use Equity Crowdfunding?

943 Words4 Pages

Why do Entrepreneurs are Likely to Use Equity Than Loan Crowdfunding in Raising Capital for Starting New Businesses?
Many people like to start business using crowdfunding, but sometimes fail to know the right method to use in capital raising. Crowdfunding is the way of raising money via an online contribution in order to finance small businesses. This is done where the large number of people put together the small amount of money using the internet and use that money to finance new businesses and existed businesses (Nesta, n.d.). Crowdfunding has different types like reward -based crowdfunding, donation-based crowdfunding, equity crowdfunding, and crowdfunded lending. This article will be focusing on loan, and equity crowdfunding. Equity Crowdfunding: …show more content…

Equity Crowdfunding Loan Crowdfunding
When people use, equity crowdfunding the investors give capital to small businesses with 1 to 10 employees (Emmerson, n.d.). The investors are willing to invest in a small startup business of 10 employees and above (Emmerson, n.d.).
In equity crowdfunding, the investors start with the expectation of exchange for shares (Emmerson, n.d.). The investors who use loan crowdfunding expect to get the interest in a given period of time basing on the amount of money they have invested (Emmerson, n.d.).
In equity crowdfunding, there is growth in share value paid dividends as time goes on depending on the interest that is made by the business (Emmerson, n.d.). In loan crowdfunding, the interest rate is fixed regardless to the increase in profits of losses of business (Emmerson, n.d.). …show more content…

The fees charged from the investors are calculated in percentages of the amount that were invested, and in most cases the fees rounds between 1% and 2%. Therefore, due to the low fees that are paid for equity crowdfunding, it makes it the best way of investment (Lake, 2015). Equity crowdfunding also is important because it helps the young entrepreneurs to get strong investors from different places. Based on this, the investors will have the shares in the business and there will be motivated to invest in the ventures they are interested in (Franta, n.d.). Furthermore, equity crowdfunding is important because there is sharing of ideas and feedback for improvement. In equity crowdfunding, the investors and business owners will share the ideas because they all need to see their businesses being successful. So, there will be sharing of ideas and feedback of improving the performance and sustainability of the business to increase the values of shares of the investors. Equity crowdfunding also helps the new business starters to promote the brands of their businesses (Nibusinessinfo, n.d.). This is done through pitching that are done on the platform and once they win the hearts of investors, the investors also keep talking about the business and call other strong investors, which leads to the

Show More
Related
708 Words | 3 Pages

secondly If you don’t already have a community to tap into, try and get the attention of a handful of influential figures who might be interested in your project we have to explain to them why we need to raise funds by presenting to them video clips and showing them our fan base in other to convince them. Communicate Often : My team and i have to communicate often to our investors and supporters Whether it’s good news or bad, Post regular updates on our crowdfunding page, and keep the process going after the campaign has ended because The real work begins after the campaigns to ensure everyone gets what they pledged. Keep It Personal : I have to introduce my team to let our supporters meet the people behind our project regardless of whether we are an established company or an up-and-coming startup, because the humor and personality in the crowdfunding campaign is a boost to help achieve our

Read More
1000 Words | 4 Pages

One hundred percent of payday lending customers had steady incomes. According to Strickland and Chapman, the average interest percentage for the payday lending industry is 391%. Many times, payday loan services will give an individual a second loan to pay the first loan. Strickland and Chapman stated, “To avoid appearing to roll over the debt, some lenders asked the debtor to take out a “new loan” by paying a new fee and writing another check.” (Strickland & Chapman,

Read More
975 Words | 4 Pages

The Pecking Order Theory suggests that the company looking to finance its investments will firstly utilise available internal funds before seeking external sources of finance (Donaldson 1961). After all the internal funds have been exhausted the company will then look for external sources of finance to fund investments. Myers (1984) suggests that firms prefer to use internal funds to avoid informational problems. When internal funds are insufficient to meet the financial needs firms will turn to debt and then equity which is at the top of the pecking order. The asymmetry of the information between the company and the capital market will make managers aware that the company has been undervalued.

Read More
992 Words | 4 Pages

Payday Loans vs. Merchant Cash Advance When you walk through the less well-to-do areas of New York City you’re bound to come across a Payday Loan business; the angler fish of poorer neighborhoods. At first glance these businesses appear to be for the people, a helping hand offering to lift you up after you fall down. This couldn’t be farther from the truth, as the allure of a payday loan quickly spirals into a state of constant debt at the hands of the very cash company that was claiming to help. To briefly summarize the role of a payday loan, they offer a short term lone that can be paid back with interest on the next payday.

Read More
698 Words | 3 Pages

In the novel “One Flew Over The Cuckoo’s Nest”, the narrator, Chief Bromden, tells the reader a terrible tale. At the end of the first chapter, he prepares the reader for what is to come. With the saying “But it’s the truth, even if it didn’t happen”(8), he says that even though what he will narrate sounds too horrible to be true, it is. This harbinger points to how the institute tears down the patients so much that they will come to find laughter as something to help them take back their freedom.

Read More
301 Words | 2 Pages

A proposal is the product of a work process which includes several important activities, on which will depend the success or failure of the proposal. Not only can a proposal make an impact on individuals, but may also result in the success of getting the approval, the support, and even financial help of others. Many of which have had a lot of success on Kickstarter, like the case with Roominate. Roominate was proposed by three female students who majored in engineering, after noticing the lack of girls in their STEM courses and feeling outnumbered by men. That being said, their clear solution to this problem was to create a toy and advertise it to girls, calling the toy Roominate.

Read More
431 Words | 2 Pages

Fintech is an emerging financial service sector that allows customers to conduction financial transactions online, for example: getting a mortgage loan. Crowd funding platform allows small investors to contribute funds to their startup venture. Data science tracks and collects data about consumer behavior. Investments involves further consumer participation in their investments with the introduction of discount brokers

Read More
824 Words | 4 Pages

Top 5 Tips to Successfully Launch an ICO Crowdfunding is becoming popular for the simple reason that technically you don’t need cash to start your dream company. Initial Coin Offering or ICO allows gathering the capital without going to various legal hoops. Before going further with the tips to launch an ICO, you might be interested in checking The Best ICO to Invest In 2018 - ico.ask.fm. Let’s now look at the top five tips to successfully launch an ICO. 1.

Read More
796 Words | 4 Pages

BDC's are a powerful way to strengthen the economy by providing small to medium sized businesses capital, where all too often banks tend to overlook them. This neglect from banks has a trickle downside effect, preventing businesses from developing new markets and causing new ideas to fall short of their promise. Great opportunities abound when companies receive much needed financial investment, allowing innovation to take hold and enhance society as we currently know it. With this concept in mind, I wish to share with you some of my thoughts on how effective your investment in BDC's can give rise and ultimately benefit our economy today. Here are five key ways I believe the economy becomes more palpable, when you invest in business development companies.

Read More
763 Words | 4 Pages

Basically, if you can provide us with a car that you're willing to use as security for your loan, we can provide you with money. Sounds like a win-win! If you want to know how you do this, continue reading down the page to get the

Read More
603 Words | 3 Pages

They are the tools that generate funds for companies and governments. They are stocks, corporate bonds, United States Government bonds and securities, and finally mortgages. Stocks: When a person buys a stock it means he acquires some of the company’s assets and earnings. A stock has two main types: common and preferred.

Read More
2756 Words | 12 Pages

Crowdfunding is a way to fund for money. “Crowdfunding is the process of funding your projects by a multitude of people contributing a small amount in order to attain a certain monetary goal” (Wikipedia). A well-known crowdfunding website is ‘Kickstarter’; it has raised over $100 million. I have not utilized crowdfunding, but two family members have. Their cause was to raise money for their trip to an outside University they are attending, and were able to get more than what they asked for.

Read More
1463 Words | 6 Pages

This is as observed from the illustration of the above graph. At high interest rates, there is low aggregate demand for money and this means that at high interest rates few people are willing to borrow more money. Because of the high interest rates, the majority of people would opt to saving rather than borrowing. This would leads to a lower rate of investment and this implies that the number of firms would reduce. Thus, we can see that at higher interest rate there is a lower incentive to borrow and invest.

Read More
1923 Words | 8 Pages

In fact, it is not unusual for a small business to pay between $50,000 and $250,000 to prepare and publicize an offering. In his article for The Portable MBA in Finance and Accounting, Paul G. Joubert noted that a small business owner should not be surprised if the cost of an IPO claims between 15 and 20 percent of the proceeds of the sale of stock. Some of the major costs include the lead underwriter's commission; out-of-pocket expenses for legal services, accounting services, printing costs, and the personal marketing "road show" by managers; .02 percent filing costs with the SEC; fees for public relations to bolster the company's image; plus ongoing legal, accounting, filing, and mailing expenses. Despite such expense, it is always possible that an unforeseen problem will derail the IPO before the sale of stock takes place. Even when the sale does take place, most underwriters offer

Read More
984 Words | 4 Pages

At first these companies has incur lot of expenses in the form of business modelling, testing and marketing their concept. Since, these companies are very small and initially operated and financed either by an individual or by partners together thereby the companies face many challenges with limited resources availing with ample opportunities. Now, if we see

Read More

More about Why Do Entrepreneurs Are Likely To Use Equity Crowdfunding?

Related Topics

Open Document