Using the crowdfunding platform called GoFundMe is a way for small business owners to get money without getting a business loan. It’s one of the best resources available to a business owner trying to raise money for a company.
It’s an option you should consider. Most people are familiar with GoFundMe as a way to raise money for personal causes, such as a medical challenge or similar hardship. It can also be used by a business and by nonprofits. GoFundMe can also be used for business needs such as startups, expansions, or new projects.
What Is GoFundMe?
GoFundMe is a service that supports crowdfunding campaigns. The business owner sets up an account, describes the need for a fundraising campaign, sets a funding goal and asks for financial support via the internet – using emails and social media platforms. GoFundMe will collect money from donations and deposit it to the business owner’s bank account.
How Can Businesses Raise Money with a Crowdfunding Platform?
There are 3 ways crowdfunding campaigns are used to raise funds:
Donations – For a cause, and donors get no return. The donors send money to the GoFundMe page, and in exchange get nothing, except good will. Hopefully, they will also receive a thank you.
Equity-based – Donors become investors and get a small piece of the business. Usually, it is a very small piece and the size of the piece is related to the amount of the donation.
Rewards-based – Donors get a product or service in exchange for their financial support. For example, a small business that manufactures a product such as candles or hops sends a sample to each donor. Or if the small business is service-based, a discount can be applied for the next service appointment made by the donor.
GoFundMe only allows donation-based campaigns for small businesses. In other words, GoFundMe donations cannot be equity or rewards-based for a small business. Other sites allow equity or rewards-based donations.
What are the Benefits of Using GoFundMe for Business Funding?
First of all, you’ll never know what type of response you’d get unless you try. Truly, you have nothing to lose. If you set a fundraising goal of $10,000 and you only fundraise $4,000, well, that’s $4,000 you didn’t have.
Here are other reasons why you should consider using GoFundMe to raise money for your business?
- Shorter time frame, compared with getting business loans. A typical campaign runs for less than a month. You might wait at least a month, and most often two months, to find out if you’ve been accepted for a business loan.
- Not impersonal – friends, family, and contacts can become involved. And via social media, you can reach out to them all over the country.
- You’ll pay a platform fee, but only against the money that is raised. You don’t need to provide money upfront.
- GoFundMe’s customer support is easily accessible and responsive. The website is chockful of information to answer any question you might have about the process.
- No application process. No providing lots of documents, no meetings at the bank, no financial reports required.
- Not taxable. Although it should be reported on 1099 as “other income” in general GoFundMe monies aren’t taxable. The donations are considered just that – gifts. As such, you don’t pay taxes on gifts.
GoFundMe Versus Kickstarter
GoFundMe and Kickstarter are both crowdfunding sites – that’s how they’re similar.
Using the crowdfunding website Kickstarter, small business owners can run fundraising campaigns that are equity-based or rewards-based. GoFundMe only allows donation-based crowdfunding campaigns. Small business owners can’t ask for donations in exchange for equity in their business, and they can’t provide a product or service in exchange for a donation.
READ MORE: GoFundMe.
How to Create a GoFundMe Campaign for Business
A GoFundMe campaign is easy to start. Small business owners are often pleasantly surprised by their success when they venture into crowdfunding platforms.
Here are some basic steps to take for GoFundMe campaigns:
- Sign up for a GoFundMe account.
- Create your campaign page, where you’ll describe your reasons for the fundraiser. You can use pictures and videos to appeal to crowdfunding donors.
- Set your fundraising goal. You’ll get frequent updates from GoFundMe on the status of your fundraising efforts. If you go over your funding goal, that’s okay.
- Blast the information on the personal network on your social media channels. Also, share the link using emails and texts.
- Collect donations, which will be deposited to the business bank account you’ve specified. That’s how businesses receive funds.
- Send thank-you notes to all GoFundMe donors who used your crowdfunding website and helped with funding your business.
- Withdraw the funds and use them for your business needs.
How Much Does It Cost to Run a GoFundMe Campaign?
It doesn’t cost you anything upfront to run the campaign.
You’ll have the investment of your time, as you make your campaign page letter-perfect, eye-catching, and appealing. Make your campaign page read like a compelling story.
For your investment, you’ll have the time it takes to select the appropriate images to use, and if you develop a video to run on your GoFundMe campaign page, that will also require your time.
GoFundMe charges a .30% payment processing fee. In other words, when you start raising money with donations, you won’t get every dollar.
Here are some numbers, as an example. Let’s say that you’ve reached your funding goals to raise $5,000. After the .30% processing fee, you’ll get $4,853.50. That’s how crowdfunding platforms and campaigns work. Other platforms also charge a fee for fundraisers. Still, with business loan options you’d be charged interest, applied to the amount of your business loan. It doesn’t cost you anything to try a campaign.
How Do You Get the Money From GoFundMe?
The campaign donations that you receive through the GoFundMe site will be set up to be transferred to your business bank account. Before the funds go from the site to your company business account, the processing fee will be charged.