The Term “Crowdfunding” Is Gaining Traction
The term crowdfunding is appearing more and more frequently. An increasing number of businesses and foundations are opting for this modern form of online business financing. In today’s economy, crowdfunding has evolved into arguably the most important alternative financing method for businesses and (real estate) projects.
What Is Crowdfunding?
Crowdfunding works differently from traditional bank financing. The literal meaning of crowdfunding is “raising money from the crowd”. Rather than applying for a loan from a bank, an entrepreneur in need of capital presents their plans to a large group of individual investors, known as the crowd, and asks them to invest.
Many people each contribute a (small) amount, and together, all these contributions add up to a substantial total. As a result, the required funding is often raised quickly and easily.
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Different Types of Crowdfunding Projects
An investment via crowdfunding can offer returns in both financial and non-financial forms. In the world of crowdfunding, we typically distinguish between four main types:
- Donation: Donating money to a good cause. The investor receives nothing in return — this is pure philanthropy.
- Sponsorship: Supporting a project by a company or individual in exchange for a non-financial reward. This form is often used in the creative industries.
- Equity: Purchasing shares in a company. Investors are compensated through dividends and potential capital gains. The return on investment plays a central role.
- Lending: Providing a loan to a company or individual. This is a rapidly growing form of crowdfunding, where the return on investment is also a key factor.
Why Choose Crowdfunding?
Due to its many advantages, crowdfunding has become increasingly popular among businesses in search of working capital or funding for property projects. It’s also an appealing option for private and professional investors, as it offers the potential for attractive returns.
Given the current low interest rate environment, leaving savings in the bank yields virtually no return. Private and institutional savers are therefore looking for alternative investment opportunities with higher yields. Crowdfunding offers a simple and accessible way to achieve more return on capital. It has firmly established itself as a key component of the future financial landscape.
The Advantages of Crowdfunding
A growing number of companies are turning to crowdfunding to finance their projects. Even when internal or bank financing is an option, crowdfunding is often consciously chosen because of its many advantages:
- Entrepreneurs have greater control over the terms and conditions of their funding projects. This flexibility is typically lacking with banks or traditional financial institutions.
- Crowdfunding investors often become customers, ambassadors, or even suppliers. The emotional engagement of investors frequently leads to word-of-mouth promotion.
- Many crowdfunding projects offer attractive returns, making them appealing to investors.
- Crowdfunding can form an important part of a company’s online marketing strategy. It’s an effective way to raise brand awareness and generate free publicity.
- As an investor, you can spread your risk by choosing your own investment amount and selecting businesses that align with your interests and risk profile.
- A crowdfunding campaign also serves as market research, providing direct feedback from potential investors and customers.
Crowdfunding as an Investment
The number of crowdfunding platforms continues to grow steadily. As more platforms emerge, so does the diversity within the sector — making crowdfunding even more appealing to investors. Many investors have now embraced crowdfunding as a modern investment vehicle, attracted by its high returns and the transparency that characterises most crowdfunding projects.
Bank-Free Financing
Through Capital Circle, we exclusively offer loans to businesses. We’ve branded this approach as Bank-Free Financing, bringing clarity to the crowdfunding landscape. Capital Circle is a dedicated crowdlending platform for both entrepreneurs and investors, and a specialist in making capital work.
Why Capital Circle?
Since the launch of the Capital Circle platform, more than 550 crowdfunding projects have been successfully financed by entrepreneurs, raising a total of over €65 million. With a success rate of over 90%, Capital Circle is a trusted choice. Here are a few more reasons to choose us:
- AFM Exemption (Dutch Financial Markets Authority)
- Third-Party Funds Foundation – Online Payment Platform
- Security Trustee Foundation – KOM Group
- Comprehensive project assessment including insights from other investors
- Attractive returns and low fees
- Clear acceptance policy and realistic interest rates
- No payment required until 90% of the target amount is reached
- Investor dashboard with detailed financial overviews
- Over €100 million in total funds raised
- More than 750 projects funded
- 5.41% net annual return (over the past 36 months)
Want to learn more about what crowdfunding with Capital Circle can offer your business? Don’t hesitate to contact us on +31 (0)15 – 760 00 19 for a free consultation.
Choosing the Right Crowdfunding Platform
To reach a large group of investors, entrepreneurs present their funding plans via a crowdfunding platform. Capital Circle is one such platform. Each project listing includes the target amount, a detailed business case, financial data, and the terms and conditions, such as interest rate and loan term.
Both private and business investors can then choose to invest in the project. Once the target amount is reached, the raised funds are disbursed to the entrepreneur, and investors begin receiving monthly interest and repayments.
Want to know more about how crowdfunding works at Capital Circle?
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