Crowdfunding

Definition of ‘Crowdfunding’

The term crowdfunding is used to mean a method of funding a project or business by raising small amounts of money from a large number of people.

Using the internet, crowdfunding makes it easier and cheaper for a small business to gain access to larger amounts of funding. As small businesses and startups tend to be riskier, crowdfunding also has the advantage of spreading the risk by reducing the amount an individual backer has to provide.

In some countries crowdfunding is controlled by legislation and regulation, which sets out who is allowed to provide crowdfunding and the maximum amount they are permitted to subscribe.

Financial Template Loan Based Crowdfunding Definition

The loan based crowdfunding definition for use in the financial projections template is that it is another form of debt used to finance the business for a specified term and interest rate.

Crowdfunding is grouped together and included on the balance sheet under the heading debt. The term and interest rate for the crowdfunding finance also needs to be entered to allow debt repayments to be calculated for the cash flow statement.

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