I am lucky enough in my work environment to encounter lots of people starting new projects, creating new businesses and generating ideas for future developments. A creative environment will foster and nurture these progressions like no other. Start-ups are springing up all over and I don’t believe there has ever been such an exciting period in independent business growth as the one we are experiencing now. Exciting times eh?
So while I am continually inspired by new ideas, I am slightly lacking in the fundamental knowledge of how these things work, how start-ups are funded and what opportunities are out there for newbies like me.
One of the key factors I have been learning about of late (thanks to the FundingKnight blog post Crowdlending vs. crowdfunding…what’s the difference and what does it matter? amongst others) is the difference between debt and equity for businesses.
To the uninitiated here’s a brief definition as far as I can see. Crowdlending is a means to borrow money, get a business loan and get a cash injection for a viable new business plan or proposed expansion. Within this borrowers would also set up a repayment plan.
Investors providing the money for loans will receive a return higher than that of an average high street bank savings account. They will have no say or input into how the business is run, what they produce or its end results. Its very cut and dry.
Crowdfunding on the other hand is, as I now understand it, equity based (I’m learning! It’s fun! Join me!). Which means you invest in a project or business that you like and believe in or something that simply catches your interest or passions. In return lenders have a vested interest in something they admire and also have a stake or share in the business or project which essentially means they have a say in how it is run and how it will develop in the future. Money is invested with no strict repayment plans as you would with a business loan.
So now the differences have been established in my head it is beginning to make sense. In reality if I was looking to borrow some money for a fabulous business I would want a business loan, looking to crowdlending and a formalised repayment set-up. Why? Because as a small business with big ideas and plans I would want someone to lend me money without having to contend with another person’s potentially different agenda.
Loans from crowdlending companies such as FundingKnight are invaluable and can truly change the innovative business landscape around us as we leave the creative forces at large in the world to keep coming up with the big ideas, whilst still providing investors with solid returns on their money. It all adds up to me plus don’t forget about the warm and fuzzy glow that comes included, free of charge, to anyone who wants in. Now where do I sign up?