What is crowdfunding?

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crowdfunding it's a system of crowdfunding which has grown thanks to the generalization of the Internet. Do you want to know more about how it works? In this article you will answer your questions.

Crowdfunding: definition

crowdfunding Consists of the participatory financing of a project. Unlike other types of financing, in this case it is common for the patrons to not know each other. The financing of the different projects may or may not be for profit or to achieve a reversal. This is the reason why this term is often confused. with that of crowdlending, which refers exclusively.

The first informal operations were born in 2006. The economic crisis of 2009-2014 restricted credit and financial entities did not finance certain projects. This form of crowdfunding was born making necessity a virtue because the Internet favored contact between the two parties and favored financing when others did not offer it.

The main types of crowdfunding

This type of financing is of various types and the element that distinguishes them is whether there is some type of remuneration. If so, the important thing is to know what type the reward will be. There is a certain regulation in order not to cause harm. These are the main crowdfunding typologies:

Donation

This format is the one commonly associated with Non-profit organizations. The idea is, basically, that you give money for the development of an organization's project. It is a simple option because it has no major pretensions and social organizations have frequently offered it.

Loan

This financing, which coincides with the crowdlending, consists in lend an amount in exchange for a interest. The Law to promote Business Financing recognize this possibility to earn money. If you are interested in achieving medium-term profitability, this is a good option. One of the characteristics of this possibility is that a higher interest rate is usually offered than on other income securities. It is important, however, that the conditions are clear and transparent.

Investment

This modality is also called actions and involves a participation in the business. The objective is for the person who contributes to become partner and have weight in decisions. This type of business financing It occurs in projects of a certain magnitude. What happens, on many occasions, is that the projector has to be very attractive because, otherwise, it is difficult to raise capital.

Reward

Reward financing is an update to the old in-kind payment. The philosophy of this contribution is that you receive a subscription or a gift in exchange to give a money. In reality, this model is halfway between non-profit and corporate financing. This option is interesting in sectors such as press or the editorial because it helps foster commitment.

Reward donation

The donation for reward It is another of the financing possibilities that exist. There is one condition, and that is that the money donated goes to a cause supportive. The “reward” would usually be a non-profit project that does not have to be tangible. This is a recurring strategy in NGOs either political parties.

 

What is a crowdfunding platform

The crowdfunding platform It is an entity specialized in raising money for this type of projects. The objective is mediate between investors and the organization or company. Not in vain, one of the big problems was that the two parties could contact each other. Of course, to operate, these types of platforms are required to meet a series of conditions:

  1. The first requirement is that the platform is recognized by National Securities Market Commission (CMNV) or the Bank of Spain. The first aspect is related to investment and the second to loan operations. The objective is to carry out a certain control so that related companies do not act without following a minimum rigor.
  2. The platforms must have a minimum capital to operate. The lower limit is set at 60,000 euros and a civil liability of 300,000 euros. This filter serves, in practice, to prevent passage to non-solvent companies.

On the other hand, the investors They also have limitations when operating. There is an investment limit of 3,000 euros per project and a maximum of 10,000 euros per platform for individuals. Accredited investors can invest more, but as long as they earn more than 50,000 euros per year.

Conclusion

The forms of financing have gained in complexity and, why not say it, in variety. crowdfunding It is an interesting alternative for promote an economic or social project. This is also an option for individuals to contribute to a project. It is good to know all the modalities to get the most out of them.

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