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By definition, crowdfunding is generally described as either formal or informal efforts to obtain small amounts of capital from a large number of individuals to fund a project.  Prior to the advent of the Internet, the concept of crowdfunding was generally limited to efforts of small business owners to borrow from, what was traditionally known as, “family, friends, and fools”.  

The Internet has been a boom to crowdfunding, and a recent Google search for “crowdfunding for small business” found 1,220,000 results and, by the end of 2016, more funds were raised via this means than via venture capital.  

Generally speaking, there are 3 different types of crowdfunding available for small business owners/entrepreneurs to access.  These are:

  2. DEBT

A. Reward Crowdfunding: Various internet websites offer vehicles for small business owners to solicit funding from outside investors.  They are generally used in situations where the donor will receive items or services of value in return for his or her investment.  In exchange for financial support, the donor, also known as “backers or supporters”, receives rewards in the form of free products, services or samples.  The level of reward is generally based upon the amount of funding provided.  The host site generally retains a percentage of the funds raised.  There are 2 models currently in use: either an “all-or-nothing” funding model in which the recipient only receives funds if he or she meets or exceeds their respective funding targets, or a “keep-what-you-raise” model in which the business retains whatever funds it raises.

Recently, business blogs have rated the “best” reward crowdfunding sites, including the following:


  • largest site in the world
  • focuses on technology, design, film, travel, and eco-friendly businesses
  • 47% of successful campaigns are run by women
  • Size of site makes it a challenge for an individual campaign to stand out
  • Fee is 5% of amount raised plus a 3-5% credit card processing fee
  • Can either fund “all or nothing” or “keep what you raise”


  • Used by both consumers and businesses
  • Can be a test to determine viability of business model
  • Wide range of businesses use platform
  • Fewer business categories than Indiegogo
  • Can only fund “all-or-nothing”
  • Fee is 5% of funds raised plus 3-5% payment processing fee


  • Site is designed for restaurants, cafes, bakeries, and food truck owners
  • Backers get free desserts and credit towards food and beverage
  • Does not disclose fees
  • Can only fund “all-or-nothing”


  • Less well-known than other sites so raising funds might be a challenge
  • Used by Microsoft, Reddit, and Soylent and claim a 91% success rate
  • Fee is 2.5% from successful campaign plus 3% credit card processing fee
  • Can only fund “all-or-nothing”


  • Can only be used only by businesses
  • Provide hands-on guidance on fund raising before campaign launches
  • Charges a flat $179/month fee for accessing site
  • Can be a challenge to be noticed unless technology company
  • In addition to monthly fee, they charge 3.5% + 30 cents credit card processing fee
  • Can only fund “all-or-nothing”


  • Accessible by artists and creators, and good for freelancing artists, Etsy sellers, and photographers
  • Backers are called “patrons” and can fund campaigns with a set amount of money each month or a per project basis
  • Fee is 5% from funds plus 2-5% credit processing fee
  • Can only fund “all-or-nothing”

Plum Alley:

  • Designed specifically for women in food, fashion, art, tech, and other industries
  • Lesser-known site than some competitors which may limit fund-raising
  • Fee is 5% from campaign funds + 2.9% credit card processing fee
  • Can only fund “all-or-nothing”


  • High visibility due to use by personal or charitable causes
  • The site provides support specialists with rapid response to questions
  • Site generally used to raise small amounts
  • Fee is 5% of funds and a 2.9% + 30 cent payment processing fee
  • Can fund “keep-what-you-raise”


  • Largest, broadest crowdfunding community on the Internet
  • Used by individuals, charities, and businesses
  • Provides a “success school” to help users generate a successful campaign
  • Fees are steep if campaigns don’t reach goal – 8%
  • Fee for successful campaign is 4% + a 4% credit card processing fee
  • Can fund “keep-what-you-raise”


  • Launched in 2010 and has helped over 60,000 campaigns raise over $86 million
  • Used by both individuals and businesses
  • Easy to share campaign on social media
  • Not sure if platform is currently operating
  • Fee is 5% of amount raised
  • Can fund either “all-or-nothing” or “keep-what-you-raise”


  • Specializes in health, medicine, and scientific research
  • Depends a lot on business owner’s expertise in the field
  • They have a team of scientists that review each proposal to ensure it fits
  • Backers share in the results of research performed, including peer-reviewed journals, news articles, academic posts, etc.
  • Site states a 48% success rate
  • Can be challenging to be approved by team
  • Fee is 5% of funds + 3% payment processing fee
  • Can fund only “all-or-nothing”

B. Debt Crowdfunding: is similar to bank financing except, in this case, the lender either is an individual or a fund specifically designed to pursue this type of financing deal.  The main benefit of this lending source is that it is typically much faster than a bank loan.  Debt crowdfunding is appropriate for firms selling products or services to other businesses vs. consumers.  There are fewer debt crowdfunding sites than reward sites.  Included in this list are:


  • They provide loans for inventory financing
  • The idea is that these loans are in addition to Kickstarter or other start-up funding
  • Business must have completed at least one successful production run
  • Site provides a lot of flexibility, including  the interest rate negotiated between backers and borrowers and length of time needed to sell inventory
  • Pay backers as inventory sells
  • Loan limited to 25% of business’ annual revenues unless the inventory is backed by purchase order
  • Average APR is 20-30% and a 1.5% fee based on the amount withdrawn from site

Lending Club:

  • Personal loans, up to $40,000 which can be used for business purposes, Small businesses can borrow up to $300,000
  • Loan term is 1-5 years
  • Site promises quick turnaround on funding, typically a week
  • Minimum personal credit score is 650
  • Business loan borrowers must be making at least $75,000 in revenues and have been operating for at least 2 years
  • Interest rates run from 5-30%


  • Personal loans, which can be used for business purposes, can be made up to $35,000, which is site’s maximum
  • Second in popularity behind Lending Club
  • Funding typically takes a week
  • Minimum credit score is 650
  • Average APR 5-30%

Funding Circle:

  • Business loans up to $500,000
  • Interest rate is lower than Lending Club or Prosper
  • Minimum credit score is 620
  • Minimum annual revenues of $150,000 or more and have been in business for 2 years or longer
  • More difficult to be approved than competitors
  • Interest rate averages 13-18%


  • Loans up to $500,000 for terms of 2-5 years
  • Interest rate is similar to Lending Club and Prosper
  • Typical funding within a week
  • Payments equal 1-6% of monthly sales
  • Credit score is not a factor, but historical revenue and profit is critical to determining access to platform, so strong revenues are important
  • Average APR is 8-25%


  • Crowdfunding at 0% interest, and no fees
  • One of the largest crowdfunding platforms in the world
  • Maximum loan is $10,000, with a 36 month repayment term
  • Must be 18, an US resident, and use proceeds for a business purpose
  • No current foreclosures or liens
  • Must be able to demonstrate “social capital” by making a loan to another business (minimum of $25) and by having multiple friends and family members make a loan to business


  • Used to fund residential “flip” properties and commercial real estate
  • Can be funded within 10 days
  • Can obtain up to 90% loan-to-value
  • An be used for either short-term or long-term funding
  • Will provide debt and equity crowdfunding
  • Minimum loan amount is $500,000
  • Average APR is 8-12%

Patch of Land:

  • Similar to RealtyShares but are more suitable for smaller projects
  • Minimum loan size is $100,000
  • Can obtain up to 80% loan-to-value
  • Typically fund within 1-2 weeks
  • Tough to qualify unless seasoned borrower
  • Average APR is 8-12%

C. Equity Crowdfunding: when these funds are raised the business owner must be willing to give up a portion of the ownership of the enterprise in exchange for the investment.  Of those sites, the following are some of the more well-known:


  • One of the oldest and well-known equity crowdfunding sites
  • Used by Uber, Postmates, and Thumbtack to meet investors
  • Any US or UK-based business is eligible
  • Prior experience of founding team is a critical factor, along with post-launch revenues or offline investors involved in business
  • No fees are assessed
  • This is not a funding site but instead is a way for borrowers to find accredited investors and a set of online fundraising tools
  • A lot of businesses use this platform, which makes it challenging to be noticed by potential investors


  • This site has helped over 200 firms raise over $260 million in funding
  • Average start-up has raised over $1 million in less than 2-3 months
  • Users are typically very innovative/unique firms
  • Site provides a range of services, including closing, escrow, funding, and funds transfers
  • Geared more towards technology or cutting-edge firms
  • Fee is 5% of funds raised


  • This site focuses on funding firms that have traditionally been challenged to find venture capital funds
  • Borrower can choose company stage (e.g. seed funding, Series A, etc.), area of business, and location
  • Most of their deals area equity funding related but there are a few debt funding offers
  • Cost starts at $199/month


  • Gives smaller firms access to large venture capital firms
  • Goal is to help businesses spend less time fundraising and more time on running the business
  • Funding range is from $500,000 to $5 million
  • High bar for successful funding (only 1% of firms find funding)
  • There are multiple fees associated with funding
  • Cost includes 5-7.5% on capital raised; 5% warrant coverage or equity; up to $4,000 for escrow, due diligence, etc.


  • Older, more established site which can be used to raise smaller sums than other sites
  • Amounts range from $10,000 to $10 million
  • This site has a patented business plan and analysis software accessible on a subscription basis and if used the chances of approval increases by 10-fold
  • Most of the site’s features require a paid subscription
  • Cost is $600/quarter


  • One of the largest equity crowdfunding sites, with over 28,000 investors
  • Projects include single family residential flips, office buildings, and commercial properties
  • Closing is typically between 30-45 days
  • Maximum 90% of costs
  • Minimum loan is $1 million
  • Costs are not disclosed

757 Angels:

  • A network of over 100 members that specifically targets the Hampton Roads region
  • In addition to capital, the group also offers strategic advice and mentoring to select start-up and early stage companies
  • Costs are not disclosed

Please note that this list is not all-inclusive nor should it be viewed as an endorsement of a particular crowdfunding site.  Any prospective user of these sources should complete his or her due diligence before committing to use a particular platform.  It is also recommended that the total/true cost of a selected platform be understood before committing to use a site.  Additionally, with the exception of 757 Angels, none of the sites have a local representative and that the borrower will be using the Internet as their primary point of access.

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