Is Crowdfunding The Best Development To Ever Happen To Financing?

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The financial world has been seeing a lot of things come and go and crowdfunding is one of the latest things that has seen a big following in the past few years. It benefits both end of the spectrum from the people looking to get a loan and the ones that are able to provide those loans. But what makes crowdfunding different is the option for investors to actually earn off on the success of the business they are backing up.

Banks would give out loans and earn from the interest they assess on the borrower and once the loan is paid off, they move on to the next customer who is looking to take out a loan. Crowdfunding with its equity platform allows a more proactive involvement in the business for the investors. This is because they get a piece of business ownership on the startup just like how it would be when they dabble in the stock market and take up stock ownership in listed companies.

With this difference and more, there are many people who believe that crowdfunding is the next big thing in the financial industry if it has not already taken that role. It has helped thousands of business startups pursue their dreams and has actually fostered confidence among young and up and coming entrepreneurs in the business industry.

Looking at crowdfunding

One of the things that social funding has done is that it provided startups as well as small and medium enterprises an alternative when raising the initial capital they need. In the past, they only had to rely on banks and even venture capitalists to take out a loan for their specific business need. They can ask people they know but it takes a lot of time and effort to approach them one by one.

Many people think that banks feel a certain level of resentfulness with crowdfunding because they are taking some of their potential clients but in reality, they are working together and the new platform even helps traditional lenders manage their own risk portfolio. It might be hard to believe but banks should be happy with social funding and some actually are.

Startups are by nature risky endeavours for banks when they talk about extending a loan because profitability is still a variable. It is different with established banks that prefer to borrow rather than put out bonds because banks know that there is a low risk for these big companies to default on their business loans. It is usually for capital infusion or business expansion.

Crowdfunding caters to these startups and diverts the risk away from traditional lenders and passes it on to individual investors essentially dissipating it with the sheer number of small investments. This is something banks and the finance industry needs to understand.

Crowdfunding has also spurred business growth because it encourages startups and SMEs by helping them get the funding they need. Social funding includes many people into the mix and increases the chances for project initiators to find the right investors they need for their campaign.

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This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated by CoAssets.com. CoAssets is South East Asia’s first listed and largest real estate crowdfunding platform. If you have any Crowdfunding news or stories to share, please email [email protected]

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