CFIRA

Many Small Businesses Never Heard of Crowdfunding

Crowdfund ignorance is not bliss. Credit agency Experian discovered that more than two-third of small businesses it surveyed are unaware of crowdfunding.

Experian surveyed 300 small and medium enterprises (SME) and found that awareness of different types of business finance is very low among SMEs, with most continuing to rely on traditional bank overdrafts or personal sources of cash for additional funding. Alternative sources of finance are yet to have made a significant impact.  ”Of the various forms of business funding options, crowd-funding was the least well-known among respondents, with 69 per cent never having heard of it,” Experian reported. “Meanwhile, angel investment, business cash advances and government grants also scored poorly in terms of awareness.”

When questioned about the first thing they do when thinking about additional financing, the respondents disclosed:

  • 42 per cent of them would go to their personal bank.
  • One in ten said they would try all the major banks first.
  • Seven per cent said they would search the internet for the best deals.
  • Six per cent said they would speak to a broker.

The findings also reveal that 60 per cent of respondents had sought some form of extra funding in the last 12 months and the need to alleviate short-term cash flow problems was by far the biggest reason for applying for extra cash (58 per cent). This outstripped activities for growth, such as expanding their product portfolio (20 per cent) or hiring more staff (12 per cent).

Experian also found that only one in four (27 per cent) SMEs definitely planned to apply for some form of extra funding in the coming year.

Article by A. Brian Dengler. Mr. Dengler is a CFIRA member and an attorney with Vorys, Sater, Seymour and Pease LLP. Mr. Dengler is a former Vice President and Chief Counsel of AOL, Inc. Image (c) Crestock by Devke.

 

 

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