Depending on who you talk to, crowdfunding can either be a great way to fund a small business startup or a big mistake. The benefits are plenty when things go according to plan, but the possibility for failure is great. Millennials are up for the challenge more than older generations.
Crowdfunding provides an alternative to loans, credit lines, and traditional investors while allowing a business to get a sense of product demand before creating it. By utilizing the internet, a would-be business owner can collect donations from around the world with a solid idea and pitch. The core market is built-in, and contributors tend to be great for word-of-mouth marketing. The advantages can be tremendous a campaign is successful. It’s not hard to see why an aspiring entrepreneur would be interested in this type of funding.
The National Foundation for Credit Counseling (NFCC), a nonprofit, recently released the results of its 2018 Consumer Financial Literacy Survey, finding that millennials are more likely than other age groups to crowdfund small businesses. The survey comes from a Harris Poll conducted in March among 2,017 U.S. adults ages 18 and older. It found that adults ages 18-34 are more likely than their older counterparts to say they would solicit crowdfunding or borrow money from friends, family, or business partners.
NFCC spokesperson Bruce McClary commented, “Making the right financial decisions for yourself and your business requires a sharp focus in a world where there are more choices than ever before. Having a clear understanding of each option helps make it easier to find the way forward at the intersection of personal and business finance.”
32 percent of American adults would seek a business loan through a community or national bank, credit union, or online-only lender if they were looking to start a new business, the poll found.
Those 35-44 are more likely than younger or older folks to say they would apply for a grant or seek such a business loan. According to NFCC, “proceeding confidently in this direction”
is likely connected to how knowledgeable people are about traditional lending sources. The survey found that adults 35 and over are more likely than those between the ages of 18 and 34 to feel knowledgeable about the fees their banking institution charges. Additionally, older adults are also more likely to give themselves high marks for their general knowledge of personal finance, the nonprofit says. 34 percent were not sure where they would be able to get money to finance a new business.
While crowdfunding can be an incredible boon to a potential startup, the concept is not without its drawbacks. The main issue is that there is no guarantee that a campaign will succeed. The reality is that most do not. As far as having the know-how, which the survey suggests is lacking from a significant amount of people, there are plenty of resources online about how to improve the likelihood of a successful crowdfunding campaign.
The views expressed herein are those of Chris Crum, as of the date above and are subject to change. This publication is for informational purposes only and should not be construed as a recommendation for any specific insurance product or service. Information has been collected from sources believed to be reliable, but has not been verified for accuracy. These views and opinions do not necessarily represent those of Bryn Mawr Trust, its directors, officers, affiliates, and/or any/all of the contributors to this site. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not endorse any third-party companies, products, or services described herein and assume no liability for your use of this information.