Types Of Crowdfunding Explained

Crowdfunding is a platform where the investors, as well as the borrowers, are in profit. But in both cases, you need to find the best investment platforms to avoid problems.

There are a couple of ways in which we can categorize crowdfunding methods. Generally, they're investment-based. For our convenience, we'll split them into three categories:

  • Reward
  • Debt
  • Equity

crowdlending guide

Reward Crowdfunding

Reward-based crowdfunding asks fans to contribute to a job in exchange for solid, non-monetary benefits, like getting your name on their site, a handwritten thank-you notice, a t-shirt, a cooler, or anything the final product is.

Reward-based crowdfunding permits entrepreneurs or job founders to pre-sell a good or service to establish a new business, business idea, or fresh merchandise without incurring debt or losing the equity in the business. On occasion, the pledges are contributions, where no goods are delivered.

Debt Crowdfunding

Debt-based crowdfunding is requesting a bunch or set of peers to give you cash for your marriage, allow you to repay debt, finance a new organization, or simply help expand your business undertaking. In return, you guarantee to pay them an agreed-upon rate of interest in exchange for the cost.

Your interest and ability to get funded are based on your narrative, credit history, and ability to pay back the loan.

Equity Crowdfunding

Equity crowdfunding is a way to get entrepreneurs and small companies to attract funds for their company in exchange for equity in the business — an ownership stake. In Equity-based crowdfunding, the supporter/investor receives shares of this company, typically in its first phases, in exchange for the money pledged.