Lending to crowdfunded businesses

Description

Abstract: Even an entrepreneur who completes a successful crowdfunding campaign will likely experience short-term cash crunches from time to time. This article suggests some ways for lenders to evaluate the application of a crowdfunded company applying for a short-term loan or line of credit, such as asking applicants with earlier crowdfunding rounds under their belt to provide a detailed accounting of how they used funds from previous campaigns. The article also suggests that lenders need to scrutinize the company’s financial projections, cost structure and revenue projections. A sidebar offers a guide to crowdfunding terminology.