Paper on Alternative Forms of Financing
Crowdfunding
Short description
Crowdfunding literally means collecting money from a crowd. Crowdfunding is via the internet, so it
is all online. You start at a crowdfunding platform from your liking, then you can create a
crowdfunding campaign for your business. You add a description of your company and a certain
amount of money as target. You promote your company and share the link to find investors.
Through the link they can invest in your company and the investors can choose how much they want
to invest.
Different types of crowdfunding
There are different types of crowdfunding, and they all have a different type of payment. Most of
the time investors want something in return to pay them back. There are four possibilities of
crowdfunding and their payments:
● Equity --> Investors buy stock of your company and get a dividend.
● Loan capital--> Investors provide a loan through crowdfunding. You can choose the
accounting rate of return and term of payment.
● Compensation --> You will give the investors compensation by a product or by a service. For
example, if your business is a clothing company, then you will give them free clothing of your
brand.
● Donation --> Investors can also decide that they want to give your company their money as a
gift and do not want anything in return, however you will have to deal with gift taxes.
Motivated explanation
Mies-and-scène is a small business which wants to have a bigger target audience and needs money
to rent theaters, to buy costumes etc. So, crowdfunding would be a great way to collect money, also
because they're a small business and do not make a lot of profit. If investors choose to invest by
compensation, Mies-en-Scène can offer free theater shows in return.
Expected costs
Each crowdfunding platform will ask administrative costs. The average amount of administrative
costs is about 5% of the total amount of the money that will be collected. The amount of
administrative costs is different for each crowdfunding platform. Most of the crowdfunding
platforms do not have other costs, but this is also different for each platform. Some platforms will
ask a certain percentage of a donation or an amount of money for each transaction etc.
Crowdfunding
Short description
Crowdfunding literally means collecting money from a crowd. Crowdfunding is via the internet, so it
is all online. You start at a crowdfunding platform from your liking, then you can create a
crowdfunding campaign for your business. You add a description of your company and a certain
amount of money as target. You promote your company and share the link to find investors.
Through the link they can invest in your company and the investors can choose how much they want
to invest.
Different types of crowdfunding
There are different types of crowdfunding, and they all have a different type of payment. Most of
the time investors want something in return to pay them back. There are four possibilities of
crowdfunding and their payments:
● Equity --> Investors buy stock of your company and get a dividend.
● Loan capital--> Investors provide a loan through crowdfunding. You can choose the
accounting rate of return and term of payment.
● Compensation --> You will give the investors compensation by a product or by a service. For
example, if your business is a clothing company, then you will give them free clothing of your
brand.
● Donation --> Investors can also decide that they want to give your company their money as a
gift and do not want anything in return, however you will have to deal with gift taxes.
Motivated explanation
Mies-and-scène is a small business which wants to have a bigger target audience and needs money
to rent theaters, to buy costumes etc. So, crowdfunding would be a great way to collect money, also
because they're a small business and do not make a lot of profit. If investors choose to invest by
compensation, Mies-en-Scène can offer free theater shows in return.
Expected costs
Each crowdfunding platform will ask administrative costs. The average amount of administrative
costs is about 5% of the total amount of the money that will be collected. The amount of
administrative costs is different for each crowdfunding platform. Most of the crowdfunding
platforms do not have other costs, but this is also different for each platform. Some platforms will
ask a certain percentage of a donation or an amount of money for each transaction etc.
