Equity crowdfunding is a method of raising capital online from investors in order to fund a private business. In return for cash, investors receive equity ownership in the business. Equity crowdfunding happens on online platforms where businesses create profiles that include their pitches, financial statements and other information. Crowdfunding platforms may charge a percentage of funds raised for their services; many charge a monthly listing fee; some charge additional payment processing fees. You might also need to pay for services, such as accounting, to get the paperwork in order.
How is equity crowdfunding different?
Equity crowdfunding is not the same as rewards-based crowdfunding, which gives backers rewards (often products or services) in return for donations. Equity crowdfunding is also unlike other types of small-business funding in that it has no debt component. Rather than making payments toward a business loan, you sell shares of ownership in your company to investors.
Selling shares of your company is an alternative to a business loan. Continue reading from Nerdwallet