With the increase of popularity on networking and entrepreneurship, crowdfunding has become an essential key factor in the business world. Hence, it is crucial to understand what crowdfunding is and how it plays a part in business. The professionals at GCS Malta are here to outline all you need to know to understand what crowdfunding is.

What is crowdfunding?

Crowdfunding goes beyond the traditional circle of owners, relatives and venture capitalists of a business. Instead, it uses the easy accessibility of people’s vast networks through social media and websites to bring investors and entrepreneurs together. It is the use of small amounts of capital from many individuals to finance a new business.

How it works.

Crowdfunding has given individuals the opportunity to raise a substantial amount of money to invest. It creates a forum for all individuals with potential ideas to propose in front of waiting investors. Certain restrictions apply in most jurisdictions to who can fund a new business and how much they can contribute. These regulations protect non-wealthy investors from risking most of their savings. Many new businesses fail, and investors face a high risk of losing their principal.

Advantages and disadvantages of crowdfunding.

Crowdfunding provides the advantage for start-up companies to access a more extensive and more diverse group of investors. Through social media, both businesses and individuals can grow their audience and receive the funding they need. Another advantage of crowdfunding is that most projects are rewards-based. Here, investors can participate in launching a new product or receiving a gift for their investment.

Crowdfunding proposes the disadvantage of the possibility of damaging the company’s reputation caused by resorting to crowdfunding, the fees associated with the crowdfunding site, and other financial costs.

Why GCS Malta?

At GCS Malta, our experts are highly skilled and experienced to provide professional advice in all sectors offered at GCS Malta to our clientele. Need further guidance on one of our services? Get in touch today.