Access to capital has emerged as one of the most consistent challenges facing small business owners and entrepreneurs nationwide. The fact is the majority of small businesses trying to compete in today’s economy fall into an abyss of a funding gap – somewhere between multimillion dollar venture capital and angel options that cost a fortune and smaller amounts needs that are unserviceable through grants or fall on deaf ears at the vast majority of banks.
You hear the terms, but do you know what they mean? Here is our attempt at providing simple definitions of often used terms to help you understand a bit more about crowdfund investing. We hope it helps!
Accredited Investor: Any person with a net worth of $1,000,000 or more excluding the value of their primary residence or has an annual income of $200,000 a year for the last two years, or a couple with a joint income of $300,000.
A recent conference, “Energizing Rural North Carolina: The Building Blocks of Successful Economic Development,” organized by the Economic Development Partnership of North Carolina (EDPNC) was held in Pinehurst on July 12-13, 2018. The event was designed to bring together economic development leaders from across the State to discuss the five “building blocks” considered important to boosting growth in rural communities. These elements included infrastructure, workforce, education, health, and leadership. We propose that there is one important additional building block that’s missing – capital to fund the companies involved in urban economic development.
A well-known, small business grant source in North Carolina recently announced that 15 companies were awarded microgrants averaging just under $10,000. That’s great for those 15 companies but a total of 208 companies applied, which means 193 companies didn’t make the cut. That’s a 7% success rate.
Under a different program, the same grant source awarded grants to another 7 companies averaging just under $50,000. This was out of 185 applicants, which puts the success rate of just under 4%. Collectively, that means 371 companies are still looking for capital.
I call it the “Powerball Syndrome.” When we hear that a handful of companies “won,” we all want to be the next lottery winner but the odds just don’t stack up in our favor. The grant program to which I’m referring is an excellent program but according to the national statistics collected by Morrison and Company, less than 1% of small businesses receive grants.
Now that we’ve already covered grants, let’s take a look at the other common sources of small business capital.
Crowdfunding has helped over a million small businesses raise over 10 billion dollars and is transforming the way businesses find the capital needed to grow and scale. The world of crowdfunding is ever changing, so we put together a beginner’s guide to orient entrepreneurs and small business owners that think crowdfunding might be the right route for their business.
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