Crowdfunding

Introduction

Crowdfunding is an up and coming financial tool in Singapore. Crowdfunding allows businesses (Mainly SMEs in Singapore) to raise funding from a crowd of many individuals, rather than looking for large amounts from a few investors or from a bank. The transactions are lead online through crowdfunding websites. The draw for investors? Interest rates ranging anywhere from 6 – 20% per year.

How To Pick The Perfect Crowdfunding Platform/Opportunity

As crowdfunding gains traction as an alternative Investment opportunity for institutions and investors, investors have a wide range of options platform for their campaign. Now the question is what are the main factors for investors to consider in their decision? In selecting a crowdfunding platform and specific crowdfunding opportunity there are some factors to be considered, such as:

Beginners Mistakes When Choosing A Platform

When people think of crowdfunding they normally make some mistakes such as:


Choosing the wrong platform
You have to understand the distinctions between each type of crowdfunding site and
their specific opportunities. Different platforms offer different types of crowdfunding opportunities. Certain types of crowdfunding opportunities are available on some platform and not others, different crowdfunding sites also have different levels of tolerance when it comes to the risk of opportunity providers (I.e. the risk level of companies they raise funds for varies from crowdfunding site to crowdfunding site)


Not taking default risk into account:
Although most crowdfunding sites have not met with a default case as of yet. This does not
indicate that investment through crowdfunding carries no risk of default on the opportunity provider’s (I.e. Company you invest in) part. While high interest rates are a norm in crowdfunding platforms, it is useful to consider why the company would be interested in making such large interest payments to begin with.

Always remember that most crowdfunding platforms do not guarantee the protection of your principle investment, there is a chance that on top of not getting your returns, you may lose out on your principle investment in its entirety.

 
 
In Singapore, there is generally no perceived maximum investment, though most crowdfunding sites generally require a minimum investment of $1,000

Anyone from anywhere in the world who has an Internet connection and a bank account can participate on crowdsourcing platforms.