Providing Startup Financing Solutions Since 2001

How to Overcome the Problem With Small Crowdfunding Amounts

While crowdfunding is booming there’s a problem that comes with it. The seed capital amounts it enables you to raise tend to be small. The majority of crowdfunding transactions raise $25,000 or under for the borrower. This amount is not going to get you very far in most cases. However, there is a way to leverage the small amounts that crowdfunding can supply to raise additional capital. The way to do this is to treat the crowdfunding capital as the down-payment you can then use to secure a larger loan from a bank or other lender. Perhaps, you need $100,000 to acquire some key business asset which will enable you to create cashflow?  The bank likes your proposal but there’s just one thing missing. You lack the down-payment.

Given the right circumstances you may be able to raise the required down-payment through crowdfunding. A lot of your success in raising money this way will depend on the power of your pitch on the crowdfunding site. The pitches are rapidly becoming sophisticated involving slick video presentations with professional camera work and snappy editing.  However, if you can pull it off and raise the down-payment amount the bank requires, you have just opened to the door to significantly more funding.

Obviously this is going to entail some time and effort on your part. You need to craft a loan package for the bank.  Then if the only drawback is the lack of down-payment on your part, you may be able to raise it through crowdfunding.

This tactic is also applicable to where you are talking to investors instead of a bank. If the investors want to see that you have some “skin the game” consider crowdfunding again.


One Response to Crowdfunding: How to Leverage It

  • Peter, I would like to hear if you have heard of any success in seeing crowdfunding uses in this way. At BoeFly, we see many borrowers who lack proper equity, but if they were able to crowdfund that down payment it would really help them establish credibility with their bank of lending institution. I would love to hear if you’ve heard of any success in the last two years applying this concept.

Leave a Reply

Your email address will not be published. Required fields are marked *