Proceedings of the 18th International Academic Conference, London

COST OF CROWDFUNDING AS A SOURCE OF CAPITAL FOR THE SMALL COMPANY

ANNA MOTYLSKA - KUZMA

Abstract:

The main object of this paper is to analyse advantages and disadvantages of capital deriving from crowdfunding compared to other sources of capital used in a company, especially in the SMEs. As the main factor used for comparison I take the cost of capital, because it is crucial in the decision process of choosing the source of financing. The explored data is mainly obtained from the Polish economy, but I use the European and World context, too. To contrast the capital from crowdfunding I have chosen debt funds (i.e. bank loans, commercial papers and leasing or hire-purchase) and equity funds (i.e. issue of shares, venture capital or private equity funds, business angels) as the more traditional sources used to finance innovative projects in the company. Although the conventional sources of capital could be cheaper or easier to raise, they have many limitation to use, especially for SMEs and earlystage enterprises. Additionally, they are not able to ensure and provide demand for the new ideas offered by firms. This fact definitely changes the cost of used capital, especially when it should finance an innovative project

Keywords: crowdfunding, cost of capital, innovative project, SME, financial strategy

DOI: 10.20472/IAC.2015.018.082

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