Want to Use GoFundMe for Business Endeavors? Know This Before You Act
Businesses and brands – whether they are for-profit or non-profit – all require a steady stream of financing to be viable. While some will generate this revenue via sales and others will generate it via donations, every entity needs cash-flow in order to survive.
A variety of charities, non-profits and individuals find immense success through a variety of donation pleas and crowdfunding attempts. However, and with businesses, the path to crowdfunded success via platforms like GoFundMe is much more difficult – both in terms of meeting requirements and persuading donors.
As such, let’s review some important guidelines and recommendations any business should consider before attempting a GoFundMe campaign.
Why Businesses Might Use GoFundMe
There are a number of reasons why your brand might choose to use a service like GoFundMe in lieu of a traditional lending option.
For starters, your business may be nascent and not in a position to guarantee repayment. If you’re providing a novel product or have a loyal following of individuals interested in the success of the endeavor, then it may be possible to convince them to donate rather than invest.
Other businesses may not be able to secure the loans necessary to invest in even small-scale expansion projects. GoFundMe then becomes a viable option to circumvent this process.
Businesses may also use crowdfunding services like GoFundMe to test how well an upcoming product might be received. If a large number of pre-orders through the service are received after pinging users with an upcoming product, then the success of the product may be guaranteed. If it fails to make a splash, then changes may be needed.
How GoFundMe Differs from Traditional Lending
With traditional forms of lending, a business must possess a prerequisite amount of credit or capital to secure a loan. Additionally, businesses are expected to repay the loan with interest over time, potentially adding a large amount to the initial price tag. While these considerations are often worth the extra cost and legwork, they are fundamentally different from a GoFundMe campaign.
With GoFundMe, fees are assessed up-front. Each donation to a GoFundMe campaign has 30 cents deducted from the initial amount, plus an additional fee of around 3 percent. As such, the larger the contribution received from an individual, the lower the overall fee. Businesses are also limited by federal law, prohibiting them from raising more than $1 million per year through crowdfunding measures. Brands that manage to secure their initial goals via GoFundMe can continue raising money via the platform indefinitely; those that do not can still keep the funds they raised.
Is GoFundMe a Viable Option for Your Business?
Given your business is not a charity or non-profit, raising money via GoFundMe will not be easy. Most businesses that raise funds successfully through the platform either have an emotional story to tell (such as a natural disaster destroying their local facility) or have a unique product or service to provide to the world – but one that requires crowdfunding to successfully launch.
Most GoFundMe campaigns do not necessarily succeed because they fail at pinging users with messaging that either addresses a need or creates an emotional response. Small businesses with great ideas or stories to tell the world can make the platform work for them, eschewing traditional lending options for select projects. Be sure to consider all of this advice carefully when planning any future crowdfunding campaign.
It may be quicker to get a quick personal loan rather than get a business loan. You won’t have to pay income tax when the loan is repaid to you.