What is crowdfunding and how does it work?

Crowdfunding has become a popular way for businesses to secure the funding that they need for the growth or the development of a new product or service. A business can set an amount of money that they want to try and achieve and in return, they will offer a percentage of their business. This percentage will then be shared out with all the people who have offered money to the project. The number of people who give money will depend on how quickly you reach your target amount and whether any large investors want to give money towards your business.

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There are lots of different reasons that businesses use crowdfunding as a way of sourcing money but it is always best to speak with your Gloucester accountants to ensure that this is the best option for your business and that the equity that you are releasing is not going to put your business in a vulnerable position in the future if it were to grow to the point where it is floated on the Stock Market. An accountant will be able to talk you through other funding options and to help your product growth projections and income and expenditure forecasts that will allow you to assess what funding your actually need.

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It is important that you use a reputable crowdfunding site and that you adhere to any regulations in your country that determine how much money you are allowed to ask for and how much equity you can give away in return. IN most cases the platform that you use will have a fee set that you will pay if you reach your funding total. This is factored into the money that you raise so you can be assured that you will walk away with the full amount of money that you need to cover your project or business growth.

There are also often restrictions on the types of projects that you can ask for funding for. Again this will differ depending on what crowdfunding platform you are using as well as where your business is located and what laws and regulations might apply. In some cases, the type of business that you operate and its legal status can also have an impact on your funding options. For some businesses operating as sole traders, there will be very limited options as to how you can use crowdfunding as a source of funding.

Make sure you do your research before you start using crowdfunding and speak with your Gloucester Accountants to make sure that you can safely release the equity and check whether there are any other funding options available to you that might be more appropriate.

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