How Equity Crowdfunding Can Swell to a $300 Billion Industry
Not everyone believes the crowdfunding industry has the potential to become so widespread.
To put it in perspective, at the end of the third quarter, small-business lending by banks (loans with a balance of $1 million or less) totaled $642 billion, according to FDIC call data.
That compares to just $1 billion to $1.2 billion in funding annually by the entire category of alternative lending, according to Biz2Credit.com
"Crowdfunding is a good idea, but the question is how to build it into long-term scalable business? Can a business owner keep coming back for funding two to three times each year? The regulations aren't set in stone yet. I don't think they have figured out the mechanism
He adds that while the process might work well for niche projects and startups, "it is less appropriate for buying equipment loans, capital improvements and working capital. These are the things needed day-to-day by small businesses such as a Dunkin' Donuts (DD) franchise or a medical office," Arora adds. "I don't foresee crowdfunding replacing SBA loans or business lines of credit. For a mainstream business, I don't think it works."
Still, crowdfunding will have a large impact on the investment world and fundamentally change the U.S. business culture, Camillo and other panelists agreed.
"Crowdfunding is social funding. So if you have an idea, you no longer have to be concerned about finding an angel investor or venture capital that understands
If the average investor took part in equity crowdfunding, the country could move from one that has 60,000 angel investors to 6 million angel investors, according to Camillo.
"I think over the course of the next decade you'll see crowdfund investments taking over the angel
-- Written by Laurie Kulikowski in New York.
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