Updated: 24/06/21
The 2 types of sources of funding for social and entrepreneurial projects
Many people are currently embarking on the adventure of entrepreneurship, given that it is one of the most advantageous opportunities in the business world. Despite this, there are many doubts that may arise with the arrival of COVID-19, given that financing is as valuable as it is necessary, and there are different types of financing available today, depending on the needs of each individual or company.
In most cases, financing, of whatever kind, is necessary for the creation of SMEs or for the self-employed and their survival in a situation that has changed even more in the wake of the health crisis.
Nowadays, there are numerous sources of financing for companies to choose from, depending on the situation, such as the 3Fs, the well-known loan or factoring. However, technology has made it possible to create the two most profitable and interesting definitions in the sector for financing social and business projects: crowdfunding and crowdsourcing.
What is crowdfunding?
Crowdfunding is used to finance social or business projects when a large number of people give a small amount of money in order to obtain funding for a certain period of time. There are also 4 types of crowdfunding:
- Donation crowdfunding: as its name suggests, is aimed at financing social projects and involves donating or giving altruistically an amount of money with no financial benefit in return.
- Reward CrowdfundingThe "seed capitalisation": this consists of receiving a product or service in exchange for a consideration from the investors. Both parties benefit, as the company pre-launches the product or service and the investors receive it at a lower price.
- Investment crowdfunding: investors receive an equity stake in the company and the investors achieve the return at the time the project is financed.
- Crowdfunding loanis a very attractive and popular source of funding worldwide and consists of investors putting up money in exchange for an interest-bearing consideration (ranging from 6 months to 3 years) and returning the funds plus a return to the investors.
And what is crowdsourcing?
On the other hand, financing projects with crowdsourcing does not entail any economic contribution, since the tasks and work of all types of professionals are outsourced. In this way, the creation of ideas is acquired on an ongoing basis, reducing costs and efforts for the tasks carried out by the entire community.
If you need more information about these or other forms of financing for business projects, do not hesitate to contact our experts. At Lever Group we will advise you on everything you need.
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