Using the crowdfunding platform GoFundMe is a way for small business owners to get money without getting a business loan. It is one of the best resources available to a business owner trying to raise money for a business.
It is an option that you should consider. Most people know GoFundMe as a way to raise money for personal causes, such as a medical challenge or similar issues. It can also be used by a business and by non-profit organizations. GoFundMe can also be used for business needs, such as startups, expansions, or new projects.
What is GoFundMe?
GoFundMe is a service that supports crowdfunding campaigns. The entrepreneur creates an account, describes the need for a fundraiser, sets a funding target and requests financial support via the internet – using emails and social media platforms. GoFundMe collects money from donations and deposits it into the entrepreneur’s bank account.
How can companies raise money with a crowdfunding platform?
There are 3 ways crowdfunding campaigns are used to raise money:
Donations – For a good cause, and donors get no returns. The donors send money to the GoFundMe page and get nothing in return, except goodwill. Hopefully they get a thank you too.
Share-based – Donors become investors and get a small share of the company. Usually it is a very small piece and the size of the piece is related to the amount of the donation.
Rewards Based – Donors receive a product or service in exchange for their financial support. For example, a small company that manufactures a product such as candles or hops will send a sample to each donor. Or if the small business is service oriented, a discount can be applied for the next service appointment made by the donor.
GoFundMe only allows donation-based campaigns for small businesses. In other words, GoFundMe donations cannot be based on stock or small business rewards. Other sites allow stock or reward based donations.
What are the benefits of using GoFundMe for business financing?
First of all, you never know what kind of reaction you would get unless you try. Really, you have nothing to lose. If you set a $10,000 fundraising goal and you’re only raising $4,000, well, that’s $4,000 that you didn’t have.
Here are other reasons why you should use GoFundMe to raise money for your business?Shorter time frame, compared to getting business loans. A typical campaign lasts less than a month. You can wait at least a month, and usually two months, to find out if you have been accepted for a business loan. Not impersonal – friends, family and contacts can get involved. And you can reach them all over the country via social media. You do pay a platform fee, but only against the money raised. You do not need to provide any money in advance. GoFundMe’s customer support is easily accessible and responsive. The website is packed with information to answer all your questions about the process. No application procedure. No need to submit many documents, no bank meetings, no financial reports needed. Not taxable. While it must be reported as “other income” on 1099, GoFundMe funds are generally not taxable. The donations are considered just that – gifts. You therefore do not pay tax on gifts.
GoFundMe vs Kickstarter
GoFundMe and Kickstarter are both crowdfunding sites – that’s how they look alike.
Using the crowdfunding website Kickstarter, small business owners can run equity-based or reward-based fundraising campaigns. GoFundMe only allows donation-based crowdfunding campaigns. Small business owners cannot solicit donations in exchange for shares in their company, and they cannot provide a product or service in exchange for a donation.
READ MORE: GoFundMe.
Create a GoFundMe campaign for businesses
A GoFundMe campaign is easy to start. Small business owners are often pleasantly surprised by their success when they venture into crowdfunding platforms.
Here are some basic steps for GoFundMe campaigns:Sign up for a GoFundMe account. Create your campaign page, where you describe your reasons for the fundraiser. You can use photos and videos to engage crowdfunding donors. Set your fundraising goal. You will receive regular updates from GoFundMe on the status of your fundraisers. If you exceed your funding target, that’s okay. Blow the information on the personal network on your social media channels. Also share the link via emails and text messages. Collect donations, which will be deposited into the business bank account you specified. This is how companies receive money. Send a thank you note to all GoFundMe backers who have used your crowdfunding website and helped fund your business. Withdraw the money and use it for your business needs.
How much does it cost to run a GoFundMe campaign?
It costs you nothing upfront to run the campaign.
You will have the investment of your time as you make your campaign page letter-perfect, eye-catching and attractive. Make your campaign page read like a compelling story.
Your investment will give you the time it takes to select the right images to use, and developing a video to run on your GoFundMe campaign page will take your time too.
GoFundMe charges a 0.30% processing fee. In other words, if you start raising money with donations, you won’t get every dollar.
Here are some numbers, as an example. Let’s say you reached your funding goals of raising $5,000. After the 0.30% processing fee, you get $4,853.50. This is how crowdfunding platforms and campaigns work. Other platforms also charge for fundraisers. However, with business loan options, you would be charged interest applied to the amount of your business loan. It costs you nothing to try a campaign.
How do you get the money from GoFundMe?
The campaign donations you receive through the GoFundMe site are set up to transfer to your corporate bank account. Before the money goes from the site to your company’s business account, you’ll be charged a processing fee.
Image: DepositphotosMore in: Crowdfunding
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