Investors receive their money back with interest. Also called peer-to-peer (p2p) lending, it allows for the lending of money while bypassing traditional banks. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in. In the case of microfinance, where very small sums of money are lent to the very poor, most often in developing countries, no interest is paid on the loan and the lender is rewarded by doing social good.
People invest in an opportunity in exchange for equity. Money is exchanged for a shares, or a small stake in the business, project or venture. As with other types of shares, apart from community shares, if it is successful the value goes up. If not, the value goes down.
What does “all or nothing” mean?
“All or nothing” (sometimes referred to as 'fixed funding') means that an entrepreneur will receive none of the funds raised in a crowdfunding campaign if a pre-agreed funding target threshold is not met before the funding window closes. All funds held in escrow for the campaign will be returned to the funders if the funding target has not been met. A funding target threshold for release of the funds to the entrepreneur may be lower than a funding goal or target of a campaign.
What does “all or something” mean?
“All or something” (sometimes referred to as 'variable funding') means that an entrepreneur will receive all of the funds raised in a crowdfunding campaign regardless if the pre-agreed funding target is met or not at the close of the funding window. All funds, minus a hold-back to pay the funding portal fees, may be released immediately to the entrepreneur on receipt or held in escrow until the campaign closes and then turned over to the entrepreneur.
What is a funding window?
A funding window is the time-period a funding campaign is open and actively accepting investment funds. Securities regulation or the funding portal may impose a time limit on the entrepreneur in which to raise capital.
What is a funding goal or target?
A funding target is a pre-agreed amount of capital that the business or entrepreneur seeks to raise from prospective investors during a defined funding window (or subscription period).
- Comprehensive and transparent funding solution
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