Alternative Business Lending Tip: Why Crowdfunding Can be a Start-Ups Worst Nightmare

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As you consider alternative business lending options for your dynamic start-up, one viable source may seem to be Kickstarter, Indiegogo, or any other popular crowdfunding platform. After all, what would be better than raising capital and building buzz at the same time? Heck, you might even end up on the cover of WIRED or Inc. What’s not to love?

Well, if you’re like tens of thousands of start-ups who have fled the crowdfunding space empty-handed after having wasted invaluable time and resources, then there’s actually a great deal not to love – because, frankly, crowdfunding can turn out to be your start-ups worst nightmare. Here are 3 reasons why:

1. There’s no such thing as free money.

Everyone who agrees to support your crowdfunding campaign – whether it’s $50 or $500 or more – is entitled to a product or service, depending on their contribution amount. And while this may not seem like an issue right now, when it comes time to fulfil your commitments, you may run into major bottleneck and resource-shortage issues. If that happens, the positive buzz you generated over a period of weeks and months can turn very ugly in a matter of hours. If Shakespeare were alive today, he’d no doubt agree that hell hath no fury like a crowdfunder scorned!

2. You have to use the funds in a certain way.

Let’s say your goal is to raise $50,000, and you happen to raise $75,000. That’s great. But what will you do with that extra $25,000? Legally, provided that you fulfill all of your contribution commitments, you’re not obligated to spend it on revenue-generating business activities. But guess what? There’s another court in the land, and this one can be much more powerful at times than the one with gavels and witness stands: the court of public opinion. As such, you risk sparking a firestorm of criticism if you don’t spend it on activities that your supporters – who may have little or no business experience – deem appropriate and acceptable. In fact, they will go out of their way to punish you in the most publicly humiliating way possible, so as to dissuade future start-ups from following in your footsteps.

3. Crowdfunding competition is ferocious.

If you think that the business landscape is competitive, it’s a walk in the park compared to what’s happening in the crowdfunding space. The novelty has definitely worn off, and legitimate crowdfunding sites are seeing hundreds of new campaigns added each day. As such, competition for crowdfunding dollars is ferocious, and funder fatigue is starting to set in.

What’s more, it’s often not the best or most viable ideas that are getting funded; it’s the ones that seem to catch “lighting in a bottle”, and simply be the right campaign at the right time (and some publicity from friends in high places doesn’t hurt!). The message here is that you simply can’t depend on raising even $10,000 through crowdfunding. Yes, it may happen, but it’s not a reliable source and certainly not one you would bet your business on.

A Better Alternative Business Lending Option: Mulligan Funding 

In our experience, a much better way to give your start-up the financial support it needs to succeed – and thrive – is through a working capital loan.

A working capital loan doesn’t put you at the mercy of market forces, or the whims of funders who give you $50 but want a say in how you’ll run your business. It’s a simple, transparent cash infusion that you can use for any purpose that you wish – such as purchasing inventory, launching a marketing campaign, upgrading your IT systems, hiring new staff, and so on.

Of course, it’s not free. But it’s not laden with traps and surprises either. Based on factors such as the amount of your working capital loan and the duration, you’d simply pay back a fixed amount each month. There is no administrative hassle and the amount is automatically deducted from your bank account.

Contact Us to Learn More Today

Be assured that we’re not here to throw cold water on your crowdfunding dream, and if you’re inclined to invest the resources and take the risks, then we certainly hope that you succeed — and that we see you on the cover of WIRED and Inc.!

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.