How crowdfunding opens a door for small business

Some of the nay-sayers who are disparaging the idea of crowdfunding are making the same tired old recommendations: Go to the Small Business Administration. Go see your banker and get a loan. Apply for venture capital or get an angel investor, or start out with your “friends and family” round of funding.

The fact is, if you’re a small business, these recommendations are out of reach. The first thing we need to do is define “small business,” and it seems the threshold has been rising to include larger and larger companies. VCs don’t want to talk to you unless you need at least a few million in funds; angels may be interested in smaller deals but nonetheless only want businesses that are on a much higher scale than to which most small businesses aspire. The SBA is of very little help of you’re a startup. And what about banks? Money is so tight and the requirements are so stiff, most entrepreneurs can’t even get through the door. Friends and family? Sure, if you have those kind of friends and family, and they’re willing to part with their money, go for it. But again, most entrepreneurs just don’t have that kind of network.

Now what type of small business is being served with crowdfunding? The JOBS (Jumpstart Our Business Startups) targets businesses needing only up to $1 million in capital, and there is no lower threshold. If you’re starting a drywall contracting business out of your garage and need ten thousand bucks for tools for example, you can crowdfund. The fact is, businesses needing less than a million dollars in startup or expansion capital have been shut out and ignored by traditional sources of funding.

There was a time in America, many years ago, when an ordinary person that didn’t necessarily sit in the same pew at church with five venture capitalists every Sunday, could easily launch a small business, and maybe even get cooperation from the friendly neighborhood bank. Those days have been gone for far too long. Crowdfunding, which is now allowed under the JOBS Act, will revitalize Main Street’s small businesses, and give entrepreneurs the chance they need. And in the process, yes, it will create some jobs along the way as well.

Entrepreneurs seeking crowdfunding will of course, need some help along the way. That’s one of the advantages of VCs and angels, who typically take an active and advisory role in the businesses they are funding. Crowdfunding on the other hand, means getting  small investments of up to about $2,000 each from lots of people, who may be less hands-on in forming the business’ strategy. But, there is help available still, and services like ours will help a small business get to where they need to be, find the funds they need, and tell the world just how great they are.