CrowdFunding refers to the practice of funding a business or project by raising multiple small amounts of capital from multiple people via the internet and social media.
There are a variety of crowdfunding types, including Reward-based, Equity-based, and Debt/Loan-based.
Reward-based crowdfunding means that the new or early-stage business is funded by obtaining financial support from multiple funders who receive a reward in exchange for early-stage funding. These rewards may include merchandise, early access to products, VIP treatment, etc.
Equity-based crowdfunding involves funding a business by offering shares in the company in exchange for funding from multiple funders. These funders receive ownership in the business, and can also provide valuable expertise and access to networks.
Debt/Loan-based crowdfunding means that a business is funded by obtaining smaller loans from multiple lenders in exchange for the business paying interest. These lenders are entitled to an interest for the duration of the loan.