Crowdfunding vs. Business Loans - Which one you prefer?

Debt financing in the form of business loans gives you the liberty of operating your business through
someone else’s money without sacrificing a stake of equity in your business. Crowdfunding, as the
name suggests, is a funding method where a bunch of investors and donors pledge money to the
enterprise with an expectation of owning equity units or getting your products in return. The
enterprise sets up a crowdfunding campaign which becomes a platform to raise money from the
investors. You are required to pay platform fees which usually includes a certain percentage of the
funds raised. Most of the times, crowdfunding is limited to a particular project.

Which alternative to finance your business is the most feasible?

Evaluate the following points.

• Efforts

Crowdfunding straight up requires a lot of effort and even manual labor on your part. First of all, you
need to create a sturdy and solid marketing plan which is enough to convince the investors that your
product or service is worth investing in. You need to set up a campaign and follow up on all the
clerical and administrative work. However, when you avail a business loan with a fintech company
online, there is hardly any effort you need to take. Since these business loans are available online, all
you need to do is log in to their website and apply for the desired loan which is possible in merely a
few clicks.

• Processing expense

When you set up a campaign for crowdfunding, the crowdfunding platform will charge a one-time
percentage fee based on the loan amount. However, when you avail a business loan online, you are
not required to pay any processing fee.

• Time-consumption

When you apply for a business loan online, the application process takes minutes to be processed.
There are options and tabs where you can check your eligibility within seconds just by entering the
basic details about your organization, its turnover and other financial details. Once the loan
application has been approved, the disbursal process may take less than 6 months. However, with
crowdfunding, it’s a tediously long procedure to gain business finance.

• Probability of getting finances

With crowdfunding, you have to showcase your ideas and products to everyone and you’ll receive
funding only if your idea impresses the concerned people. The possibility of gaining finances after
you have invested the amount of time and money is relatively less as compared to business loans
availed through fintech companies online. The scrutinization with the online business loans is
minimal and even the documentation is relaxed. Moreover, you don’t have to pitch your ideas to
digital lenders.

• Repayment options

When it comes to repaying, crowdfunding requires you to let go of an equity stake as a unit of
ownership or your products as a part of repayment. However, when it comes to business loans,
you’ll get access to sufficient business finance without forgoing a part of your enterprise or without
letting go of your ownership.

Conclusion

Acquiring unsecured business loans in Mumbai and all over India has become an easy task due to
fintech companies.