You must have heard about the non-conventional method of business funding through crowdfunding. You might also be aware of another method of funding business by using the tool of cash advance used by real estate agents. Although both the methods relate to raising funds for business, these are quite different in both concept and its application. If you are an entrepreneur and have dreams of making it big by launching a one of its kind business, then you must be well conversant with the available options so that you can decide the path to take without wasting time. Before you delve deep to understand the differences between the two methods of business funding, it is good to know that the two methods not only work differently but are also applicable at different stages of business. There are other differences too that would become clear on reading this article.
Crowdfunding suits business startup
Most entrepreneurs who do not mind to take an outward approach to fund generation for starting up the business would be ready to take their business ideas to the masses. They would explain its high points and convince people to come forward to contribute money that would help the business to take off. For doing it, entrepreneurs would enroll with a crowdfunding platform that upholds the various facets of the business to viewers and provides the opportunity of interacting and engaging closely with the audience. By using the platform, entrepreneurs persuade the audience to become a part of the venture by donating money to the cause. The response they receive helps to create the corpus necessary for taking the idea off the ground and give it shape in reality.
Attract new collaborators
Most of us have heard about open source software platforms available in the public domain and open for improvement and enhancement from the contributions of interested people. The beauty of being open source is that new ideas flow in from various contributors that enhance the software features and enhances its value. Users enjoy the goodness of the best ideas that keep on adding.
Similarly, when entrepreneurs float their ideas online to attract people for donating to the project, it increases the visibility and attracts people with similar ideas who come forward to enrich the core idea further. As more collaborators join the venture, it enhances the value of the project and drives it towards success. Thus, crowdfunding not only helps to validate your ideas to generate finances required for starting up the business but also adds more value to idea enrichment to make it more effective.
Discover new business partners
Crowdfunding is a complete departure from the traditional methods of funding business. It helps to expand your business horizon and discover new investors who can even become your business partners. When you offer the shares of the company to the donors as a reward, they become co-owners of the company you float. You might find some very dynamic contributors who take an active interest in the business and help to take it to new heights. Refinement of the idea leads to better business performance.
Now let us look at the various aspects of the advance commission, the other financial tool that is highly effective in generating your funds for business.
Advance commission for special businesses
Commission advance is a financial tool that finds wide application among real estate agents and often known as realtor cash advance. The arrangement helps real estate agents to have instant access to the commission almost immediately on striking a deal without waiting for its closure. The norm of the industry is that although the agents secure their commission as soon as they execute the documents that initiate the sale/purchase deal the money reaches them after two or three months, the time it takes for the deal to get through. Due to the delay in getting the cash, they experience gaps in the cash flow, which they would like to eradicate.
To ensure continuous inflow of cash, the only solution is to expedite the commission payment. Real estate agents sell the assured commission to a commission advance company for a discount so that the cash is available to them immediately without having to wait for the deal to close.
Funds for different businesses
While both crowdfunding and advance commissions both help in funding business, the applicability is quite different. While crowdfunding mostly suits startups cutting across industry segments especially unconventional business models that support new ideas, the method of the advance commission has much-restricted application for the real estate industry mainly. Some other businesses that use the commission-based revenue model like mortgage brokers, travel and insurance agents can avail the facility too.
The type of business and the revenue model are the determining factors in deciding the method of business funding.