Topic 1.3.4 Sources of business finance

Question 1

What is crowdfunding?

Answer 1

When a business sets a target amount of finance to raise.
The business idea is posted on a crowdfunding website
A wide range of investors pledge to invest a certain amount of money in the business in return of a share in the business.
Once business reaches the target,then it receives all the pledged funds.

Question 2

Advantages of crowdfunding?

Answer 2

-Good way of testing the viability of the business
-if people are keen to invest it would suggest that the business has potential
-Able to raise a significant amount of finance which the business is unlikely to be able to obtain via a bank loan
-Some of the investors may be experienced entrepreneurs who can offer valuable advice.