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What About Crowdfunding?

Many people have ideas for a new business, but get discouraged by the financial requirements to make their idea a reality. Banks have become increasingly leery of new businesses. Due to increased regulatory oversight, securing a commercial loan for a startup is challenging at best. When a bank is willing to make a loan to a new business they require the personal guarantee of the business principals adding to the risk for the entrepreneur.
The latest solution to financing a new business is crowdfunding, this involves creating a network of people (usually via the internet) who will pool their money and other resources to support your idea.
Crowdfunding avoids bank loans and their monthly payments. It also means no personal guarantee to the bank, significantly lowering the financial risk to those starting a business.
The downsides include the fact the entrepreneur’s percentage of ownership will be diluted by allowing others to share in the ownership and that, depending on the structure of the company, the investors may want a voice in the management of the company.
For many new businesses, the use crowdfunding has been the key to getting launched.

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