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Crowdfunding As A Finance Model In Nigeria

Grace Christos

Inc. Magazine

  Crowdfunding in Nigeria is a method of raising capital for businesses, by pooling together small amounts of money from multiple people, instead of going through angel investors. This has been noted to be one of the ways to raise funds for financial emergencies like health, charity, and other personal things.
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Crowdfunding is usually done via social media platforms, with Twitter at the top of the list. The most common platform where payment is collected is GoFundMe, because of its ease and functionality. Funding will always be one of the challenges of businesses and startups, so it is little wonder that many turn to crowdfunding as a means to generate income for their businesses. Asides crowdfunding, other means of funding include:
  1. Personal savings.
  2. Friends and family.
  3. Funds from investors.
  4. Loans from banks and other financial institutions.
Most of these sources come with different requirements, and crowdfunding seems to be the easiest means with the least resistance. For a successful crowdfunding venture, what is required is details of facts, videos, and images about the proposed business ideas or projects. This is an innovative funding tool for 21st-century digital innovation, open to Small and Medium Enterprises (SMEs) and other social ventures and small creative ideas.

Types Of Crowdfunding

Donation-Based Crowdfunding: It is a type of crowdfunding where the public helps to raise funds without any form of payment. This is mostly done for charitable purposes, medical emergencies, to finance community-based projects, among others.
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Reward-Based Crowdfunding: It is used to raise funds for new startups, where the donors or investors get rewards based on the amount of money donated. Here, donors or investors get something back in return for their investment, usually a product or service which the company offers. Equity-Crowdfunding: It is a type of crowdfunding that requires the company to provide investors, who in return get shares in the company. Here, the investors become part owners of the company. Debt-Based Crowdfunding: It is a type of crowdfunding that operates like loans. It is preferable to be a loan, because the interest rate is much lower. Here, the donee might not be required to pay back until the company or startup begins to generate returns. The most used adopted mode of crowdfunding as seen is Donation-Based Crowdfunding for individuals and Reward-Based Crowdfunding for businesses.

How To Successfully Crowdfund Your Business

  1. Set a funding goal
  2. Have a business plan or market strategy
  3. Decide on your means of publicity
  4. Communicate effectively to potential supporters and investors
  5. Be transparent about the support received.
Crowdfunding is a great way to kickstart your business dreams and ideas, by solving the financial constraint required to raise business capital. The only criterion required most times is to get your business registered, and you can pick it up from there. Featured Image Source: Inc. Magazine
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