Crowdfunding has in many ways changed the entire world of business finance. Every model of crowdfunding, including equity and peer lending, has increased the hunger of entrepreneurs to find great ideas. It is a revolution that is taking hold in every industry and it is still in its infancy stage. In the next few years, we will all be able to see crowdfunding evolve into something incredible. Here are just a few ways that economic growth can continue to be spurred along thanks to crowdfunding.
The Total Elimination of Banks
On some crowdfunding platforms, up to 10% of the businesses or entrepreneurs who are seeking funding would never try to get funding from a bank or credit union ever again. Part of this is because there are a number of rules that govern the investment and that there is very little leeway when it comes to a repayment plan. If you miss a payment, you’re in trouble. With crowdfunding, many of these concerns go away, as do restrictions on who can get what.
If your idea is good, with crowdfunding you get funded. Period.
More Skin in the Game
The average person doesn’t have any investments whatsoever in their portfolio. It’s not that they don’t want to make an investment – it’s that they just can’t afford to do so. With crowdfunding, more people can get some skin in the game and begin building a more secure financial future. Even a $100 investment into some companies can mean a 1% share of the business and if successful, could create a windfall of a payday. Now imagine being able to invest a little, even when living paycheck to paycheck, and there’s a lot of potential for everyone to taste success.
Extreme Innovation Is On Its Way
Because the best ideas are the ones that tend to get funded through crowdfunding, it is going to force businesses to become more innovative. This is especially true if crowdfunding takes on more of a role than banking does. This innovation will lead to better products, efficient services, and that will only benefit the backers and the average small business owner. The future could compliment the banking model we have today or it could create a pricing war where both parties are fighting for survival. Either way, many advances in every industry look to be on the horizon.
How Much Will Crowdfunding Sites Take As a Cut?
The biggest variable that remains in the future of crowdfunding is the percentage that a website will take as fee for helping to raise the money. If that fee is too much, then investors and businesses will get driven off because there just isn’t enough value to justify sticking around. If there isn’t enough of a fee taken, then crowdfunding sites could potentially go out of business. There must be cost-savings on all sides and if that can be found, then investors will keep coming back to get equity.
No one knows what the future will be, but trends in crowdfunding can help us predict how it might evolve. Will it be the dominant means of raising funds for businesses? Can the average person begin to invest and change their stars? We will all know for certain very, very soon.