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If financing options like a loan or line of credit are out of reach, you may turn to family and friends willing to donate or loan money to help your small business succeed.
Online crowdfunding platforms like GoFundMe, Indiegogo and Kickstarter allow you to collect contributions from friends, family and the general public to finance your business. Crowdfunding as a practice can be a viable funding solution for small business owners since it enables you to solicit money from a large group of people.
Some crowdfunding platforms require you to offer a product or equity in your company in exchange for funds. GoFundMe focuses on charitable donations and lets business owners collect contributions without offering anything in return.
Business owners can set up fundraisings campaigns on GoFundMe’s website to raise money for a variety of expenses, like marketing initiatives, legal fees or a business expansion. If you’ve been considering crowdfunding through GoFundMe to cover business costs, we’ll help you understand what the platform offers entrepreneurs.
You can create a GoFundMe campaign for free, and there are no eligibility requirements or sign-up fees. GoFundMe doesn’t set a deadline or time limit on your campaign. After you set a fundraising goal, you can collect donations until you turn off the donation option or remove your campaign from the platform.
Once you start receiving online donations, you can withdraw money at any time. Withdrawing funds won’t affect your active campaign. GoFundMe will deposit the requested amount into your bank account within two to five business days You may also request a check if you’re a U.S. organizer or beneficiary.
When you withdraw money, GoFundMe collects a 2.9% standard transaction fee plus 30 cents per donation. You can keep donations you receive, even if you don’t meet your fundraising goal. If you do meet your goal, you can continue to collect donations for as long as you’d like.
GoFundMe provides a guarantee to protect donations. If you don’t receive funds that should’ve been delivered to you, GoFundMe will give you the missing amount.
What businesses are eligible to use GoFundMe?
Nearly any business can create a GoFundMe campaign and collect donations. People have used GoFundMe to fund a startup business, save a struggling business and cover any expense in between.
GoFundMe prohibits campaigns that are connected to any activity that violates laws or government regulations. GoFundMe also does not allow campaigns that are related to weapons, including knives and firearms. Gambling, gaming and offensive or graphic content are also not allowed on the platform.
Money service businesses like check-cashing or currency exchanges are barred from using GoFundMe, as well as any “pyramid schemes” and investment opportunities that promise high rewards.
GoFundMe reserves the right to investigate and reject any campaign. Fraudulent, misleading, inaccurate or dishonest campaigns are not allowed. Make sure your campaign accurately reflects how you plan to spend donations or how you have already spent funds — or you risk being removed from the platform.
Additionally, GoFundMe is not supported in several U.S. territories, including Guam, Puerto Rico, American Samoa, the Northern Mariana Islands and U.S. Virgin Islands.
The pros and cons of crowdfunding
Crowdfunding can be a desirable alternative to traditional business financing since you could receive funds in a shorter amount of time. GoFundMe, for instance, allows you to obtain money as soon as you start fundraising.
But crowdfunding comes with added responsibilities. For example, some donors may want to be kept in the loop regarding your business performance.
There’s also a limit to how much you can earn. The U.S. Securities and Exchange Commission dictates that businesses can raise a maximum of $1.07 million through crowdfunding in a 12-month period.
Here are some other pros and cons of crowdfunding:
- You could start a campaign without significant business experience.
- GoFundMe allows you to keep raising money after you’ve reached your goal.
- Exposure on GoFundMe could benefit the business, and you can interact directly with your supporters.
- Competing with other campaigns on the platform could be challenging.
- You need to regularly update and maintain your campaign.
- Slow time to funding: It could take two to five days for GoFundMe to deposit withdrawn funds in your bank account, whereas online business lenders could distribute funds in as few as 24 hours.
- You may owe taxes on money you receive.
5 steps to start a GoFundMe campaign
1. Create your campaign page
After determining that your business is eligible, you would need to create a fundraising campaign page. You can set up a GoFundMe account from your phone or computer to get started. Personalizing the link to your campaign would make it easier for supporters to find your landing page.
It would be good to include bright and clear photos and well-made videos to your page. You should include a compelling story about your business to help people feel connected to your campaign.
2. Set a fundraising goal
Your fundraising goal should be realistic and attainable. Each time you receive a donation, your total amount raised would be updated in real time on your campaign page. Supporters can see how close you are to your goal and how big of an impact their contribution makes.
Successful GoFundMe campaigns typically reflect a sense of urgency. Although there’s no hard deadline to reach your goal, you could create your own deadline that you would like supporters to meet, like opening day for a new store or a final due date for rent or other bills. This would help you build momentum and raise the money you need.
3. Promote your campaign
To maximize donations to your campaign, you should share your GoFundMe page with your personal social media network. Share the campaign on any accounts associated with your business, like your website or social media pages. Consider adding a link to any correspondence with customers, such as an email newsletter. Ask close friends and family to share it with their network as well. Be sure to include a personal message when sharing the link, whether you’re sharing through email, text or social media sites like Facebook.
4. Keep your campaign updated
Your supporters will likely be curious about the progress of your campaign and the performance of your business. Posting frequent updates on your campaign page would keep them engaged with the campaign and the business. You could share updates about how the funds are being used, how close you are to your goal or updates on your personal story. You may also want to say thank you or give public shoutouts to those who have donated or shared your campaign.
5. Collect funds
You can withdraw money from GoFundMe right away, and your campaign page would not reflect that you’ve taken funds out. To collect donations, you’ll need to provide ID such as a valid passport or driver’s license. You must also provide your bank information, which GoFundMe will need to verify. After requesting a withdrawal, you could see the money in your account in two to five days.
Is crowdfunding right for you?
It takes time to run a successful crowdfunding campaign, no matter what platform you use. If you can find a dedicated team to manage your campaign, you may be able to raise a larger amount of money. Having a substantial, existing online following or customer base could also increase your chances of reaching your fundraising goal.
GoFundMe allows business owners to keep all the money they raise, whether they meet their goal or not. Other platforms may not be so generous and could require you to reach your goal before receiving money. Check the platform’s policy before setting up a crowdfunding campaign.
People may be more willing to donate to your campaign if you have a compelling story about why your business needs funding. Tell your story in a concise way, either through photos, video or personal anecdotes. Once people feel connected to you and your business, they could be eager to donate and share your campaign with others.
If you are looking for small business financing, consider starting with LendingTree, MagnifyMoney’s parent company, where you can compare offers from different lenders, based on your creditworthiness.