Crowdfunding is huge. From GoFundMe to IndieGoGo, there are many websites and social media apps dedicated to raising money. While many use these websites to help fund a charity or needy family or cause, others have started using them to help fund their start-ups. The idea is great; however, there are downsides to asking family, friends, and the entire universe to help fund your business.
For starters, posting repeatedly about your start-up on social media can be a turn off to some. Sure, it is great, and many will be thrilled for you, but some will think that you are asking for a hand out. There is also the lack of due diligence that can come with not having to answer to anyone in the financial industry. For instance, if you apply for an ACH business loan, you need a proven record of accomplishment and a good business plan. With crowdfunding, you do not need to prove anything to anyone, though it would help.
Also, with crowdfunding you do not have control over who funds your venture. This may not seem like a big deal, however if an unsavory character decides to fund your project, this could look badly upon you. Another issue comes with the novice nature of your investors. They want everything done at a specific time, namely the time which you stated in your crowdfunding account. While professional financial workers will give you the benefit of the doubt if you miss a deadline, the general public may not. This may not seem like a big deal, but if people start complaining on social media, it can quickly turn into a huge issue.
While crowdfunding is great for charitable events and for families in need, merchants should consider other sources for their start-up needs. An ACH business loan is a great place to start, especially if you have been in business for a few months, and are learning that your financial calculations may not have been exactly accurate. Whichever method you choose, be sure to keep track of your supports, and be honest with them every step of the way.