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.
| Benefits of Using GoFundMe for Business Funding |
|---|
| Opportunity to Test Response and Gain Funds |
| GoFundMe provides a risk-free way to gauge public interest and potentially secure funds for your business idea. |
| Shorter Time Frame Compared to Loans |
| Campaigns on GoFundMe typically run for less than a month, offering a quicker funding solution compared to waiting for loan approvals that can take weeks or months. |
| Personal Involvement of Friends, Family, and Contacts |
| Engage your personal network and expand your reach through social media, involving friends, family, and contacts in supporting your business venture. |
| Minimal Platform Fee Against Raised Funds |
| While GoFundMe charges a platform fee, it is deducted only from the funds you raise, ensuring that you don't need to invest upfront. |
| Accessible and Responsive Customer Support |
| GoFundMe offers easily accessible customer support and a wealth of information to assist you throughout the crowdfunding process. |
| Streamlined Process without Application or Documentation |
| Unlike loan applications, GoFundMe campaigns require no complex paperwork, meetings, or financial reports, streamlining the funding process. |
| Non-Taxable Donations Considered as Gifts |
| Donations received through GoFundMe are generally considered gifts and are not taxable income, alleviating potential tax burdens. |
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.
Frequently Asked Questions
What is GoFundMe and how does it benefit small business owners?
GoFundMe is a crowdfunding platform that enables business owners to raise funds without resorting to traditional business loans. It’s an effective resource for businesses seeking financial support for various needs, such as startups, expansions, or new projects.
Can businesses raise money through GoFundMe?
Absolutely. GoFundMe is not limited to personal causes; businesses and nonprofits can also leverage the platform to raise funds for their initiatives.
How does GoFundMe work for businesses?
Business owners create campaigns on GoFundMe, describing their fundraising needs and setting a funding goal. They then promote their campaigns via email and social media. Donors contribute money, and GoFundMe collects and deposits the funds into the business owner’s bank account.
What are the different ways businesses can raise money through crowdfunding on GoFundMe?
GoFundMe offers donation-based campaigns for small businesses. Donors provide money without expecting equity or specific rewards in return.
What are the benefits of using GoFundMe for business funding?
Using GoFundMe offers advantages such as shorter time frames compared to business loans, personalized involvement from friends and family, and accessibility to a responsive customer support team. Moreover, the platform fee is only applied to raised funds, not upfront.
How does GoFundMe differ from other crowdfunding platforms like Kickstarter?
While both GoFundMe and Kickstarter are crowdfunding platforms, GoFundMe focuses on donation-based campaigns, whereas Kickstarter allows equity-based or rewards-based campaigns. GoFundMe donations are not taxable and are considered gifts.
How can businesses create a successful GoFundMe campaign?
To create a compelling campaign, businesses can follow these steps:
- Sign up for a GoFundMe account.
- Craft an appealing campaign page with visuals and videos.
- Set a realistic fundraising goal.
- Share the campaign across personal networks and social media.
- Collect donations, which GoFundMe will transfer to the business account.
- Express gratitude to donors and utilize the funds for business needs.
How much does it cost to run a GoFundMe campaign?
Running a GoFundMe campaign doesn’t have upfront costs. However, GoFundMe charges a 0.30% payment processing fee, which is deducted from the donations received. The example provided demonstrates how the fee affects the final amount received.
How do businesses receive the funds raised through GoFundMe?
The funds collected through a GoFundMe campaign are transferred to the business owner’s designated bank account. Before the transfer, the payment processing fee is subtracted from the total funds raised.
In summary, GoFundMe presents an excellent opportunity for small businesses to secure financial support through crowdfunding efforts. By understanding its workings, benefits, and best practices, businesses can create impactful campaigns and tap into a wider network of supporters to achieve their funding goals.
Conclusion
In the dynamic landscape of modern business financing, the GoFundMe crowdfunding platform emerges as a strategic asset for small business owners navigating the complex terrain of funding avenues. Beyond the realm of personal causes, GoFundMe offers businesses and nonprofits a distinctive opportunity to mobilize financial support for diverse objectives, ranging from ambitious startups to critical expansions and innovative projects.
The intrinsic value of GoFundMe resides in its capacity to forge connections between visionary entrepreneurs and individuals who share their passion. By crafting meticulously designed campaigns, setting tangible funding milestones, and harnessing the power of targeted email and social media outreach, businesses can galvanize their existing networks and extend their influence to broader audiences. Through this orchestrated collaboration, GoFundMe seamlessly facilitates the direct flow of financial contributions to the designated business accounts.
The essence of crowdfunding on GoFundMe predominantly revolves around donation-based campaigns. Despite this constraint, the platform offers an array of compelling advantages that render it an attractive financing route. Its intuitive interface, responsive customer support, and streamlined processes echo the ethos of contemporary entrepreneurial pursuits. Additionally, the absence of upfront expenses and the transparent structure of the 0.30% payment processing fee reinforce GoFundMe’s reputation as a viable, low-risk fundraising avenue.
In the crowdfunding arena, GoFundMe radiates as a symbol of inclusive finance, forging an alternative path to catalyze business growth and catalyze innovation. By capitalizing on the opportunity to curate immersive campaign narratives, foster meaningful engagement with supporters, and leverage the amplification potential of social media platforms, small business owners are poised to unlock the latent resources required to transform their visions into concrete achievements. Within the ever-evolving tapestry of business, GoFundMe embodies the potential of collective action and community-driven initiatives.
In summation, the significance of GoFundMe transcends its identity as a mere transactional platform—it embodies a conduit for partnership and conviction, empowering small business proprietors to surmount financial hurdles, extend their ventures, and contribute to the ongoing narrative of entrepreneurial triumph. As the landscape of business continues its metamorphosis, GoFundMe resonates as a resounding testament to the transformative prowess of collaborative support and the indomitable spirit of enterprise.
Image: Depositphotos
