In the current economic climate it can be pretty tough to get your hands on the capital you need to start a business. Two years ago my next door neighbor was permanently laid off her job at a commercial kitchen equipment store. Being an adventuresome spirit, she remained undaunted since she saw an opportunity to start a business from home that would replace her employment income. She put together a realistic business plan, but the loan officer at the bank flat out refused to give her a loan without putting up her home as collateral.
My neighbor investigated several alternative methods of acquiring the money she needed, but was not satisfied. Any of the sources for funding she discovered meant hefty interest rates or an equity position in her company.
My friend’s idea was viable. In the small city where we lived, there were at least 35 churches and service organizations that were always looking for ways to fundraise. Because of her particular industry experience, she saw a need she could fill. The concept was to provide a portable outdoor commercial grill and cooking services to sell burgers and other items at community events. Her plan was to charge a small flat rate fee to a church or organization to cover her costs. Then she would split the profit from the sales.
It was already a proven method of fundraising – often yielding thousands of dollars over a weekend. Most organizations did not have the upfront capital to purchase the equipment and license to operate. Part of my entrepreneurial friend’s planning was to get commitments from a number of churches before she even approached anyone for startup capital.
The solution to the problem appeared when a minister she approached with her idea explained the concept of “crowdfunding to her. He had used it to raise money for a mission to help educate children in a third-world country. For his mission, he had raised $15,000 from over 250 donors. The beauty of the system was that each individual gave a small amount as a donation which accumulated to the grand total needed. The money was give as an actual gift, not as a loan.
My neighbor created a profile on a crowdfunding website specifically catering to businesses and projects for, and by Christians. Within 3 months she raised the $27,000 she needed to get started. She set up an office in her dining room and got busy booking events for her outdoor grill. To each of her donors she gave a t-shirt with her logo and added their names to all her marketing materials. The total cost for the gifts was $600, but she was never asked to repay the donations. This method of raising capital is an effective alternative to asking the bank for a business loan.
To get free tips for raising start up capital through crowd funding, visit the Faithfunder Blog.
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