How to Use GoFundMe for Business
GoFundMe is a crowdfunding platform that can help you get funding for your business without taking on debt. While using GoFundMe for business can help finance various business expenses, it relies on you soliciting individual donations, so pulling off a successful campaign can be slow-going and take a lot of commitment.
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What is GoFundMe?
GoFundMe is an online crowdfunding platform available for businesses, individuals and organizations. You pitch your idea, set a fundraising goal, share your campaign on social media and accept donations through the platform. Small business owners can use GoFundMe to raise money to cover renovations, purchase new equipment, fund a new project and more.
Unlike other crowdfunding platforms, GoFundMe facilitates charitable donations, allowing small business owners to accept money without needing to offer anything in return.
Crowdfunding for business
Crowdfunding could be a viable funding solution for small businesses, especially if you can reach a large audience. Since startup businesses may face challenges meeting the revenue, collateral or time-in-business requirements needed to qualify for traditional business loans, crowdfunding might be the perfect solution.
The best part? Unlike a small business loan, you don’t need to repay the funds you receive through crowdfunding.
How to start a GoFundMe campaign for your business
1. Make sure your business is eligible.
GoFundMe prohibits fundraising campaigns for any services or products that violate laws or government regulations. Additionally, GoFundMe does not allow campaigns related to weapons, such as knives or firearms, gambling, gaming or offensive or graphic content. GoFundMe also reserves the right to deem any campaign unacceptable.
2. Set up your account.
You can create a GoFundMe account online from your phone or computer. Create a custom campaign and personalize your link to make it easier for supporters to locate your landing page.
3. Create a campaign page.
Craft a concise, compelling story about your business through video, photos and a written description to motivate people to support your fundraising campaign. A catchy and descriptive campaign title will also draw people to your page.
4. Set a fundraising goal.
Your fundraising goal should be specific and realistic, relating to what your network can contribute. Create a sense of urgency for your goal by setting a deadline to motivate your network to contribute. When setting your goal, also make sure to include the costs of running the campaign, including GoFundMe’s payment processing fee.
5. Promote your campaign and share progress updates.
Posting frequent updates helps you engage with your donors. You might personally thank those who have donated or shared your story while letting them know how close you are to reaching your goal. Each time you reach out to supporters, include a call to action by requesting they share your campaign with their networks. If you build a community around your campaign, you’re more likely to see a consistent volume of donations.
6. Collect your funds.
Unlike other crowdfunding platforms, with GoFundMe you don’t need to wait for the campaign to finish to collect funds. To verify your account, you must provide a government-issued ID and a Social Security number or Employer Identification Number (EIN), along with your banking information. After you request a withdrawal from your GoFundMe donations, you can expect the money to land in your business bank account in two to five days.
Other crowdfunding platforms for business
GoFundMe isn’t the only crowdfunding platform to raise funds to start or expand your business. Here’s how they stack up:
Kickstarter for business
Kickstarter uses an all-or-nothing approach to crowdfunding, meaning you need to reach your ultimate fundraising goal to receive the contributed funds. Here’s how it works:
- Share your idea for a creative project.
- Set your funding goal and deadline — between one and 60 days.
- Invite your family, friends and fans to contribute and list rewards backers can receive.
- Receive funds within two to three weeks of the campaign ending (only if you reach your fundraising goal).
- Fulfill promised rewards to backers.
Indiegogo for business
Many entrepreneurs and small business owners use Indiegogo because of their excellent support, cutting-edge tools and worldwide reach. Here’s how it works:
- Start a campaign for free.
- Match perks to your target audience.
- Choose between fixed funding (keep your money only if you reach your goal) or flexible funding (keep your money no matter what).
- Invite your family, friends and fans to contribute.
- Receive funds within 15 days of your campaign ending.
- Follow up and send perks to backers.
Unfortunately, crowdfunding platforms are rarely free. Here’s how the fees differ across the three most popular platforms:
- GoFundMe: 2.9% + $0.30 per donation (includes debit and credit card charges)
- Kickstarter: 5% platform fee, plus between 3% and 5% for payment processing fees
- Indiegogo: 5% platform fee, plus 2.9% + $0.30 for third-party credit card fees
Kickstarter and Indiegogo charge 5% of your funding total as a “platform fee,” along with payment processing fees. In comparison, GoFundMe charges a low transaction fee per donation — with no overall platform fee.
Additionally, GoFundMe allows you to keep all donations you receive, even if you don’t reach your goal. And if you do reach your goal, GoFundMe allows you to continue raising money for as long as you’d like.
Under regulations from the U.S. Securities and Exchange Commission, businesses can raise a maximum of $5 million through crowdfunding in a 12-month period. The SEC also limits the amount individuals can invest via crowdfunding platforms.
What to look for in a crowdfunding platform
When deciding what crowdfunding platform is right for you, take a moment to ask yourself these questions:
Who typically uses the platform?
Some crowdfunding platforms are known for featuring certain types of campaigns. For example, Indiegogo hosts campaigns for artists, musicians and filmmakers, and Kickstarter features startups and tech businesses. GoFundMe typically hosts charitable campaigns for nonprofits or companies that need a helping hand.
What money can you keep?
Before accepting investments or donations, make sure you understand the platform’s policy if you do not meet your fundraising goal. Although GoFundMe lets you keep any money you raise, Kickstarter and Indiegogo require you to meet your goal to receive money.
Do I have to provide a product?
Kickstarter and Indiegogo typically require a product or reward in exchange for donations. However, GoFundMe simply helps you collect donations. Plus, the GoFundMe platform guarantees a refund to all donors if the recipient misuses the funds or runs a deceptive campaign.
Pros and cons of crowdfunding
Although crowdfunding can be a quick and easy way to get funding for your business, be sure to weigh the pros and cons before proceeding.
Obtain capital without significant business experience or collateral
Typically faster funding process than with traditional financing
Ability to elicit direct feedback from your backers
Word-of-mouth marketing can benefit your business
Difficult to stand out among other crowdfunding campaigns
If you don’t fulfill the promise of your campaign, you must inform your backers that you failed
You might have to pay taxes on money you receive
Crowdfunding vs. traditional business loans
Finding the right finance solution for your business can take time and effort. Here’s a quick overview of how crowdfunding and business loans differ.
Compared with traditional financing, crowdfunding typically helps business owners get the funds they need in less time.
However, crowdfunding requires constant work. When you take out a long-term business loan, the lender rarely checks in to see how your business is doing. As long as you make your monthly payments, the lender typically is not interested in your daily operations. Backers, on the other hand, generally are more involved with your business’s overall growth and success.
Is crowdfunding right for my business?
Crowdfunding can be a good way to legitimize donations and investments from family and friends. A crowdfunding campaign can also build credibility and awareness when starting your business.
You could also use crowdfunding to test how customers respond to your new product or service. For example, if no one backs your latest project, you might decide to return to the drawing board.
Running a successful crowdfunding campaign takes time and commitment. The better your campaign, the more money you can raise. If you have a large online following or a dedicated customer base, you might have a better chance at reaching your fundraising goal.
Frequently asked questions
GoFundMe doesn’t charge any upfront fees, allowing you to launch a campaign without any risk. State your fundraising goal, tell your story, add a compelling video and you’re ready to go.
GoFundMe treats all funds raised as “charitable donations,” meaning you don’t need to repay the money or provide any services or products. GoFundMe will take a small fee for this service, with the rest of the funds available for whatever business needs you see fit.
Yes. Many startups rely on GoFundMe for business funding because it’s a way to get startup funding without needing revenue or collateral.
GoFundMe will take 2.9% plus $0.30 out of every donation. The rest is yours to keep.
Both GoFundMe and Kickstarter are viable options for funding your business. Ultimately, the right platform for your business depends on your fundraising goals, timeline, target audience and whether you can offer rewards.
Here are a few features to consider:
- Name recognition. As one of the world’s largest crowdfunding platforms, a Kickstarter campaign will likely reach more people across the globe. Millions of people have learned to trust this name, which could increase your chances of receiving the funds you need
- The all-or-nothing approach. If you set a high goal with Kickstarter, you risk receiving nothing if your contributions fall short. However, you can claim all donations with GoFundMe, even if they don’t reach your ultimate goal.
- Fees. Kickstarter charges slightly higher fees than GoFundMe.
- More funds raised. GoFundMe has raised $15 billion to date, whereas Kickstarter has funded around $7 million.
Overall, you can’t go wrong with GoFundMe’s flexible, easy-to-use crowdfunding platform. While the Kickstarter name might be more well known, GoFundMe is rising in popularity. If you want low fees and immediate access to your donations, then GoFundMe could be worth pursuing.