Previously, we made a comparison between crowdfunding and microcredit. But now we’d like to mention a form of financing that has much more time in the business. Banking has been the preferred financing method long before crowdfunding. But let’s see now a comparison between each other.

Banking and crowdfunding

It would be easy to say that crowdfunding outperforms banking permanently. But this is not entirely true, it’s worth giving a review on what is banking. Bank financing has been characterized as a process of uppermost preference. Before, saving money to invest was not as simple as it is today.

In some cases many were in need of seeking loans to invest. At that time there were private and public institutions that were responsible for offering these loans. Some governments also had the opportunity to invest in what they considered convenient and of high impact.

america crowdfunding graphic
A graphic showing the total volume of alternative finance usage in America. Source: Dinero

But perhaps one of the favorites of the whole world was banking. Which worked in an accessible and useful way. Before, people didn’t have that much facility to save money, so banking was very attractive. Many of the bank financing advocates argue that it’s always available to people and is flexible.

Certain types of financing, such as automobiles or internal loans, continue to apply. Financial institutions such as Bank of America are still working with loans like these. Which means that banking has not given up yet. Even if crowdfunding has taken the lead.

Advantages and disadvantages of both

Let’s start with crowdfunding, which is just one of several types of alternative financing. Remember that alternative financing is anyone or anything whom is independent of a banking entity. So, we have that one of crowdfunding’s disadvantages is that it has high risks of loss.

Nowadays, companies have reduced that risk but loss is still plausible. On the other hand, inadequate regulatory oversight of money makes crowdfunding become easily used to commit fraud and scams. But looking now at the positive side, crowdfunding is fast, flexible and easy to use. That’s why it’s such a popular form of financing.

bank document
One of the most notable disadvantages of bank financing is the large number of procedures and paperwork involved.

On the other hand, we have bank financing. We’ve shown different benefits and good things that bank loans have. Among them, it’s also possible to finance the acquisition of a property right away. And forecast payment of loans through periodic fees.

Many also add that there’s the continuous knowledge of the debt that you have with the bank. However, among the disadvantages of it is the obligation to establish the exact amount of money you want. Namely, being aware that you’ll have to pay interests later. And that there’s no possibility of having a loan again instantly and without frequency.

What can be concluded?

Everything will depend on the needs of the person, some still prefer bank loans. Although the numbers and data are very clear. There is a great preference in the world for crowdfunding and it seems to be increasing. Which doesn’t mean that banking is a less beneficial or convenient option. Nor less valid.

Several entrepreneurs continue to find financing through banks or specialized financial institutions. Crowdfunding is not for everyone either. It’s likely that more than one person feels uncomfortable starting an online campaign. And thus they’d prefer to go by the conventional methods.

Banking vs Crowdfunding: Who Survives? 1
It’s hard to choose sometimes…

Any decision is up to the criteria and judgment of each one. Although there are good reasons why crowdfunding is so popular. If you’re one of those who still doubt, we invite you to reflect on what you just read and that you make your own decision.

It’s important to consider what is best for a business and its lifting. What is more logical and feasible. What matters is to choose what best suits your needs and what to look for as an entrepreneur.

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Related: Most Financed Crowdfunding Campaigns

Crowdfunding or banking, you choose!