Crowdfunding models for flexible financing

In the previous two articles, we spoke of things to consider when taking a loan. As a complement to that, we will look at the new trend of crowdfunding in agribusiness, what it entails, the options, and the risks involved. This will be shared in four parts.

We have witnessed how the world is moving towards collaborative initiatives. It has become imperative that we form conglomerates in business, hold hands and bring resources together for the betterment of our communities and to enhance our contribution to the Namibian economy. Going a step back to last week, perhaps instead of considering loans, we should look at more alternatives that give us access to finances for our farming investments and operations.

Perhaps we need to look at the comparisons of equity vs debt. Most of us tend to go straight to debt when considering sources of finance. We barely think of equity options. The new trend, perhaps not in our spaces yet, is the option of developing crowdfunding as an investment option. Simply stated, it is bringing up resources together to invest in a project or a business as one. Is this an option for us and what does it entail?

Say you want to buy a farm worth N$7 million. However, you have little to no funds. So, you find 10 people as a group of friends/investors to each invest N$700 000 to be able to afford the farming project. This can provide entrepreneurs with a great start on costly projects, or speed up the development of the product process, and invest in the business growth by creating access to several investors.

This might also come with knowledge resources, which may pose an added value to the business. Crowdfunding makes it possible for agricultural projects to reach more people and help expand a project’s capital structure with more legal and creative ways of investment.

This type of investment has the potential to contribute to the agricultural sector in many ways. As we all know, agribusiness requires a hefty amount of money that may at times exceed the threshold of many investors.

This also provides an opportunity for more people to participate in the great potential of agribusinesses. Remember, “green is the new gold”. Crowdfunding may close the gap between the Cost of Capital (Debt vs Equity).

Part 2 to follow next week, be on the lookout.

Disclaimer: Crowdfunding is not to be confused with pyramid schemes.