Crowdfunding is described as the collective effort of a group of individuals who network and pool their money in order to support the efforts of other people or their business ventures.
Some critics rather dismissively consider the idea to be the online equivalent of a whip-round, but anyone who takes that view these days does not either fully understand the market forces of such a resourceful idea and certainly does not appreciate the opportunities that exist through crowdfunding.
A change in the financial landscape
Many of us are all too familiar with the fallout from the credit crunch and global credit crisis that changed the financial landscape in so many ways about five years ago.
The result of this global financial crisis was that traditional lenders effectively turned off the taps when it came to providing finance for new business ventures and property investing.
This meant that people who are looking to fund their business plans and invest in property had to find access to alternative sources of funding other than the banks, signalling the rapid growth in crowdfunding over the last few years, which has firmly established the idea as a viable and highly efficient way to raise funds.
Advantages of crowdfunding
There are many positive aspects to consider when it comes to crowdfunding and one of the major advantages is that it provides access to ready capital for those with a good track record and a viable investment proposition.
Crowdfunding is now considered to be an excellent alternative to traditional lending and a great way to fund an investment in property, as it offers the opportunity to hedge and share the risk with many others.
Easier to apply
As you might expect from a modern financing concept, the process of applying for funding is generally much easier to complete when compared to the process involved in a more traditional application for finance.
A would-be property investor is already at an advantage when it comes to arranging funding as the sources of crowdfunding for property and other ventures are populated by like-minded individuals with a positive interest in getting a deal done and a shared enthusiasm and appetite for the risk and reward involved in property investment.
Another big selling point to consider when comparing crowdfunding to more traditional funding options is that the cost of arranging the finance and the cost of finance itself can very often be extremely competitively priced, meaning you have the opportunity to get a good deal from all angles.
There a number of crowdfunding platforms that only charge a fee once the required level of funds have been raised and many only charge a nominal fee, which is generally much less than you would pay up-front to a bank, so you only incur any meaningful level of costs once you have been successful in securing funds for your investment proposition.
Whether you are a lender or a borrower, crowdfunding is certainly something to take seriously when it comes to investing in property.
George McKenzie researches funding trends. He enjoys blogging about the tricks and successes to funding projects.