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Equity Crowdfunding Advantages And Disadvantages

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After conducting interviews with people, and conducting internet research, the advantages of using equity crowdfunding were found. From the interview with Emmanuel, he said that when a person use equity crowdfunding the investors will get shares from the business. He added that “A person who want money, wish people that they will have stocks or they will remain with some parts in the business” (Emmanuel). This means that once investors are promised to get the shares in the business, they will be motivated to give out their contribution for capital. In addition, he said that the advice he can give to young entrepreneurs is to use equity crowdfunding “this is because when you use this method you are credible before people who will bring you …show more content…

Some of the entrepreneurs become discouraged from using loan crowdfunding due to its disadvantages. For example, in loan crowdfunding there is high fees are charged for interest. Based on this, since the investors expect the returns as an investment, they always ask for it regardless to the fact that business is gaining profits or losses. Also, the high fees involve in a way that, most of the crowdfunding platforms don’t charge investors for anything, but they have some amount they pay for participating in the deal and they have to cut off from the interests they get and pay some percentage (Lake, 2015).
Loan crowdfunding also has the disadvantage where the investors have to be ensured that they will get interest. when an entrepreneur use loan crowdfunding method, he or she has to give out the best plan of how the investors will get the interest, and show them the securities to give in case the business fails (Johnson, 2012). This is a big challenge since the investors will not give out their money to the entrepreneurs who will not be able to convince and pay interest. This may cause the business to fail due to payment of interests. Lastly, loan crowdfunding limits the expansion of the business through monthly payment of the interest. In most cases where there is use of loan crowdfunding, the investors request monthly interest payment. This hinders the expansion of the business because when the business is not gaining too much profit to be used in expansion, yet it has to pay the interests per month, it is likely to fail and collapse (Johnson, 2012). In addition, loan crowdfunding also affects peer-to peer the relationship between the borrowers and lenders which is a big problem to the business world (Everett,

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