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Installment Loans or Crowdfunding: Which Option Is Better?

admin February 20, 2017

Crowdfunding has introduced a new horizon of funding for business owners. Being an online platform, you can easily raise money via means of many small contributions made by a “crowd” involving different individuals. Although crowdfunding does seem to offer some attention-grabbing benefits, it still cannot be considered as a replacement for traditional installment loans. But, having an understanding of how both the systems make it easier to choose the best option for your company.

ROI comparison:

When comparing the benefits and losses of traditional business loans against crowdfunding, it’s imperative to understand the requirements of both. In traditional installment loans, you are expected to pay back the debt with interest over time. While in crowdfunding, you can easily structure your campaign as either equity or debt investment campaign, also referred as crowdlending or peer-to-peer lending. In equity crowdfunding, you can easily sell some percentage of your ownership in the company to acquire funding, or you can maybe give your donors some perks or rewards against their impressive contribution to your business. Whereas, in crowdlending, the terms of payment reimbursement are set by the owners of the crowdlending sites.

Interest Fees evaluation:

In the case of the traditional loan installments, the interest rates and lending rules are established by the Federal Reserve. Nevertheless, the final interest rate that needs to be paid is determined by your personal or business credit score, depending on the purpose and requirement of your loan. Business credit scores are offered through Dun and Bradstreet. From the time of the financial breakdown of 2008, banks entail business borrowers to provide a guarantee before lending the money, and it’s not merely based on a business’s financial statistics. In the case of crowdfunding, the fees charged is by the crowdfunding websites, which normally is a tiny percentage of the total funds raised.

Application Process analysis:

Before applying for a traditional business loan, you will need to apply through your bank or some other lender. The lender may further ask for other prerequisites including a business plan, tax returns, a down payment, and other financial statements. The application process normally takes a period of one month to three months. However, in crowdfunding, campaign lengths are established by the platform being used. The business in possession of the campaign decides which length of time is best.

PR and Marketing

In crowdsourcing, you need to invest a lot in PR and marketing campaigns to attract donors, before the idea becomes a hit among the public. In installment loans, you don’t require any sort of PR and marketing activities for getting your loan passed.

Stealing of Idea
In case of the traditional loan process, your information is safe with the funding authorities, while you can be at a huge risk in getting your unique idea stolen in case of crowdsourcing.

Response to different business genres:

Crowdfunding is best for Business to Consumer or B2C business type, however, you can easily get funds for your B2C as well your Business to Business or B2B type of business in case of applying for business loans.

So primarily, traditional lending works way better after you’ve been in business a few years.

Apart from money, a traditional lender can provide quality business advice as well. Once you have developed a relationship with you lender, they can further connect you with suppliers and potential clients to help you move up the ladder of success. But, this is only applicable if you meet the requirements for attaining a traditional loan.

Both crowdfunding and traditional loans play a significant role in the development and progress of companies. Tribal installment loans make a good option for people who ae in dire need for fast cash. Many people opt for a tribal installment loan for a number of reasons, one of them being that it allows borrowers to have a comparatively longer time to refund and can qualify for a much larger loan compared to what they might get in case of other loans.

For direct tribal installment loans, try Tribal Installment loans to connect you to a huge network of lender’s all over the country who can eligibly offer you quick cash loans irrespective of your credit history.

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