Funding is a vital element of business success in light of providing the necessary resources for operations. There is a wide variety of funding options for businesses. It is critical to consider conducting an evaluation of the different funding options by way of assessing their risks. Furthermore, firms need to evaluate the various methods with an aim of determining the funding option that will enhance their benefits. Some of the main funding options for small businesses today are crowdfunding and grants. It is due to their benefits that they can be the possible options for the business in this context.
Crowdfunding
Crowdfunding entails the practice of funding a venture by raising money from a large number of sources, especially through the use of the internet. It is mainly conducted through the use of internet-linked registries such as GoFundMe and Kickstarter (Rigby, 2011). Although each of the sources have unique requirements, an individual or business needs to create a project and request a specific amount of money, which ultimately relies on contributions and donations to meet the specific goal.
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It is one of the best choices for the investment in this context because of a variety of benefits. One of these benefits is the speed and ease of accessibility. An individual or business does not require any specific qualifications to support the crowdfunding campaign (Wooller, 2016). As such, they can create it at their own convenience. Someone can get the basics from the crowdsourcing site and start the campaign to collect the funds from the donors and other contributors. Furthermore, there is no need to make any presentations as in the case of other venture capitalists (Wooller, 2016). Additionally, crowdfunding enhances marketability. Once one establishes a page to solicit contributions, they can greatly enhance the number of people who are reached and how the business or project is viewed. Furthermore, it is possible to enhance search engine optimization (SEO) that will make the contribution page more relevant for online searches (Rigby, 2011). Furthermore, it is possible to market the venture through the use of videos that will help in showing off the products and progress of services offered by the venture. Furthermore, crowdfunding also has the advantage of feedback and community. Once the entity launches the crowdfunding campaign, they are able to share the business idea and product or service with the global community. Through the use of the modern information technology, especially by way of the internet, they are able to get instant feedback from the audience (Mishkin, 2007). Contributors are also able to point out any challenges and weaknesses in the idea behind the creation of the business, which will also help the business and its promoters to develop the idea and new features for the business.
Grants
Grants entail non-repayable funds that are given by one party, usually government entities to recipients (Wooller, 2016). A proposal is one of the main terms and conditions required for the grant to be offered. Most grants are supported so that they can help in funding a specific funding and the grant makers require some level of reporting and compliance. The applicant is thus, required to submit a proposal to the potential funders.
Grants make it as one of the best choices for this investment because of a variety of benefits. On the one hand, they do not need to be repaid. As such, the applicants do not have an obligation to pay for the funds that are received from the contributors, which in turn leads to reduced disadvantage on the business (Mishkin, 2007). Furthermore, the business is not required to give shares in exchange for the funds that are provided by the contributors. As such, the business does not need to give part of its ownership to the contributors in exchange for the funds that are contributed. There is also the advantage that the business and its promoters will gain the confidence that the business has been endorsed by the government authority providing the grant. It is thus, an opportunity for the firm to take advantage of the sponsorship.
References
Mishkin, F. (2007). The Economics of Money, Banking, and Financial Markets . Pearson/Addison Wesley.
Rigby, G. (2011). Types and Sources of Finance for Start-up and Growing Businesses: An Instant Guide. Harriman House Limited.
Wooller, F. (2016). The Finance and Funding Directory 2017/18: A Comprehensive Guide to the Best Sources of Finance and Funding . Harriman House Publishing.
