What is Crowdfunding? Definition, benefits, and types
Capital is one of the foundations in a business. If the foundation that is installed is not strong, then the business that is being run will not run well. That is the reason why having sufficient funds in a business is the most important thing to prepare.
Currently there are many ways to apply for business capital loans. To be able to get better loans, business owners can take advantage of crowdfunding. However, what is crowdfunding?
Definition of Crowdfunding
Crowdfunding comes from the word 'crowd' which means a crowd or a large number of people, and 'funding' which means collecting funds. That way, crowdfunding is a fundraising technique that is carried out by many people which later these funds will be used for the purpose of an activity or business.
According to the Financial Services Authority's website, crowdfunding is a funding technique for projects or business units that involves the wider community. The concept of crowdfunding was first coined in 2003 in the United States, with the launch of a site called Artistshare.
In this site, musicians try to find funds from their fans so they can produce a work. This activity then initiated the emergence of other crowdfunding sites such as Kickstarter which was involved in creative industry funding in 2009, and Gofundme which manages funding for various events and businesses in 2010.
Crowdfunding Benefits for Business
What are the benefits of crowdfunding for business owners? Apart from getting a business capital loan, it turns out that business owners will get a number of benefits from crowdfunding. The following are the benefits that business owners can get from crowdfunding:
1. Expanding reach
Crowdfunding activities make it easier for business owners to find investors who are interested in developing funds. In addition, crowdfunding can also facilitate interaction and various fundraising campaigns with one another.
2. Become an opportunity to introduce the business
The next benefit of crowdfunding is being able to introduce a business or fundraising campaign by providing information that highlights the business being started. For example, attractiveness, offer, target market to the value of the company.
This is intended so that potential investors can find out more about the business and the business and the steps of its development.
3. Running marketing
Business owners can do marketing from fundraising through various channels, such as social media, email, to other marketing strategies. This is useful so that fundraising can be done more quickly
Types of Crowdfunding
Crowdfunding is divided into four types, namely Donation Based, Reward Based, Debt Based, and Equity Based. In full, see the differences between the following four types of crowdfunding:
1. Donation Based
As the name implies, this type of crowdfunding collects funds using a donation system. Donors who deposit funds or capital will not receive anything in return from the proposed project. This type of crowdfunding is intended for non-profit projects such as the construction of orphanages, schools, and others.
2. Reward Based
In this type of crowdfunding, business owners will offer gifts or other rewards such as goods, services, or rights to donors. This type of crowdfunding is usually reserved for projects from the creative industry such as games, where donors who fund the project will be provided with interesting features from games.
3. Debt Based
Debt Based is the same as an ordinary loan. Prospective debtors will submit proposals and donors or creditors will provide capital which is considered a loan with returns in the form of interest.
4. Equity Based
This type of crowdfunding is similar in concept to stocks. Where business owners offer company shares with a target amount of funds within a specified time. Later, investors can buy company shares on the platform used. Equity Based is most suitable for startups and medium-sized businesses that require large capital.
That's information about crowdfunding and its types. Crowdfunding is often used as an alternative source of funding by startup companies and MSMEs who wish to develop their businesses.
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Understanding the difference between revenue and income is crucial when you are running a business strategy.
Revenue and income are two terms that are often mixed up even though they are two different things.
As reported by Paddle, in business, revenue is the top line (income or total income from products or services).
Meanwhile, income is the bottom line (revenue minus production costs) so the difference between the two is clear.
Both revenue and income have important values for a business.
Understanding the difference between revenue and income will help you understand the development and financial stability of the business.
What are the differences between the two? Read more below.
Revenue in Business
Quoted from Investopedia, revenue is the total income or income generated from the sale of products or services related to the company's main business.
Revenue in business is also known as gross sales or the amount of gross sales.
As previously explained, revenue is also called the 'top line' in business because it is at the top of the company's financial statements.
The revenue value is the income generated by a company before being reduced by any costs.
So, when a company or business experiences top line growth, it means that the company is experiencing increased sales.
A business can generate revenue from various sources, including but not limited to the following:
- sales of products, services, and assets;
- advertising;
- licensing agreements;
- payment for services;
- subscription fees; and
- rental income.
Income in Business
Income or net profit is the total income or profit of a company.
Usually when an investor or financial analyst talks about a company's profit, what is meant is the company's income.
Revenue and income are often equated because both are positive cash flows from a company.
In fact, income is the bottom line in a financial context, where the income value is at the end of the financial report after deducting all needs or expenses.
Quoting Business, a company's income can be negative if expenses exceed its final income during the period.
If income is negative, then the company is experiencing a loss. Income has two categories, namely gross income and net income.
- Gross income: total income recorded before taxes and expenses for the company are deducted.
- Net income: total net income after deducting the costs required to run the business. Net income describes the efficiency of a company in spending and managing their operational costs.
Differences between Revenue and Income
The main difference between revenue and income can be seen from how the two are defined.
Revenue is the total income or income from a company that comes from various sources.
Meanwhile, income or earnings is the final income value that arises from income minus expenses for running the business.
Well, these costs include taxes, rent, commissions, and production costs. A decrease in revenue is also known as a revenue deficit or income deficit.
Other differences that need to be understood between revenue and income are as follows:
1. Recording Section on the Report
If revenue is the top line, income is the bottom line. The purpose of this statement is the different revenue and income sections on the financial statement or income statement.
Revenue is considered the top line of total business income and income on the bottom line.
That is why even though they are closely related and intersect, revenue and income cannot replace each other's functions.
2. Calculation Differences
Although revenue is calculated by multiplying the total number of products and services sold by their price, income is calculated by subtracting expenses, costs, and taxes from all total income.
The Importance of Understanding the Difference Between Revenue and Income
Understanding the relationship and differences between revenue and income in business allows you to measure progress, analyze potential, and prepare the right business strategy.
According to Paddle, here is the importance of understanding the difference between revenue and income for your business:
1. Financial Statement
Understanding how to monitor revenue and income separately is the key to creating accurate and clear financial statements.
Be sure to calculate all aspects that will be included in revenue including investments that come into the company.
For income, it is necessary to pay attention to different expenses in each business area.
2. Financial Reporting
A good understanding of the difference between revenue and income also allows financial reporting to be more representative and effective.
Representative financial reporting is important for analyzing the profit and loss factors of the business being run.
This will also help you see better the potential and problems that need to be addressed immediately.
To understand financial reporting analysis well and produce representative reports, you can also learn by taking a Financial Analysis class.
prasmul-eli has a Financial Analysis class with instructors who are experts in their fields.
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3. Tax
Understanding revenue and income is also important for managing tax documents. The last income value or figure is the figure before tax.
You must understand the tax requirements and important steps to prepare the company's financial documents.
4. Investors
To get investors, companies do not only need revenue, because that is not enough to convince investors.
Understanding the dynamics and differences between revenue and income will help create and demonstrate a broader understanding of business operational efficiency to investors.
Don't let yourself not understand this before running a business, okay!
Understand the differences and develop an effective strategy for your business!
Doing business can be started by using investment credit services. In general, investment credit is a service that helps finance businesses both small and large scale.
This type of credit is an alternative type of bank credit, but is still officially supervised by banks in Indonesia.
Basically, investment credit is a government program that aims to develop the economy both in the region and in Indonesia. Providing investment credit to entrepreneurs can have an impact on creating job opportunities so that it can help reduce unemployment.
In general, investment credit seems quite profitable for the country and its business people, right?
Interested in applying for investment credit for business expansion? Understand more about investment credit first through this article!
Definition of Investment Credit
Investment credit is debt given to customers to expand their business. The debt repayment system can also be chosen based on a term agreement between customers who have businesses and the lender.
In Indonesia, the tenors given by banks are quite varied but generally 10-15 years. However, if you cannot pay it off within that time period, there is a 4 year deadline.
This type of credit is used to buy necessities or finance needs when building a business. Apart from that, investment credit can be applied for for various types of businesses, small and large scale.
Investment Credit Function
In general, the function of investment credit is to provide business capital for both individual businesses and institutions. The purpose of investment credit is provided so that business owners can develop their business in accordance with predetermined achievements.
In the financial sphere, investment credit is useful for moving the wheels of the country's economy and improving it. With the capital assistance provided to business owners, many businesses can develop.
It doesn't stop there, business development in the regions can have an impact on creating more job opportunities, thereby helping the government reduce unemployment.
Characteristics of Investment Credit
After understanding what investment credit is, of course there is a difference between this type of credit and others. The following are characteristics of healthy and official investment credit for you to consider:
Supervised by the Central Bank
For your information, investment credit is a government program so activities are supervised by the central bank. The central bank in Indonesia is Bank Indonesia with the function of supervising investment credit activities.
It doesn't stop there, the central bank's task is also to provide capital and assist business development in line with the function of credit.
Classified as a Government Program
As we know, investment credit is a government program supervised by the central bank. The large benefits provided make investment credit a target for parties participating in various government business programs.
Productive
Investment credit is productive. This is because the credit provided can be used to purchase inventory for business continuity and also business production costs. An example of increasing productivity is by adding tools or improvements.
With this, of course the business capital provided can encourage movement in the business's finances.
Example of Investment Credit
Investment credit is indeed interesting for those of you who have a business, either an individual or an institution. Apart from having expansion benefits, you also help the regional or government economy as long as you make payments on time.
However, what can investment credit references be used for? The following is an example of investment credit that you can consider when you want to apply!
Procurement of Business Equipment Inventory
For businesses that offer products, once they have their own factory, investment credit can be used. One of the things that can be done with investment credit facilities is purchasing business inventory.
If it is a factory, an example is the purchase of production machines. The purchase of business inventory equipment could be a component covered by the investment credit provider bank.
Building Renovation
Already have a business building, but need to renovate it to make it more viable? Investment credit can also provide costs for renovating buildings used for your business.
Examples of business buildings that can be renovated are head offices, factories or warehouses which are owned by individual businesses or institutions.
Purchase of New Buildings for Business
Have an adequate business building, but during expansion do you need a new building for production? Investment credit can help you to buy a new building for your production site.
Building a factory requires a lot of money, so investment credit can be an official financial service that can help in expanding your business.
This investment credit service provided by the government is indeed profitable for business people, both small and large scale. However, because applying for credit also has various requirements, make sure before applying you know all the requirements.
Apart from the financial matters that investment credit can help with in business expansion, you also need to equip yourself with knowledge before expanding. Want to deepen your business knowledge in the fields of supply chain, resources and marketing but don't have much time?
You can choose prasmul-eli which has several short program options.
For you business people who want to return to studying various sciences, Prasmul-eli now provides a variety of short program options with a learning duration of only 1-3 days. The program also presents facilitators who are experts in their fields so you can gain new business insights and tricks.
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With IDR 200 thousand in the past you could shop for more goods than now. This situation is an example of the time value of money.
This situation occurs because the value of the money you have now may change or even decrease in the future. One way to overcome these changes is with long-term investment.
Therefore, in this article you must learn in full about the time value of money from various concepts to calculation formulas.
Understanding Time Value of Money
Time value of money is a financial concept where the current value of money may decrease in the future. This reduction in value is caused by time, fluctuations in bank interest, and inflation.
Investopedia illustrates this concept with the following case example. If you are offered IDR 5 million now or in two years, it would be better to accept the money now.
Even though the amount of Rp. 5 million will not change in the next two years, the value and goods it can buy will decrease. This is caused by the factors mentioned above.
Therefore, by receiving IDR 5 million now, you can increase its value by investing. That way, you will receive additional money from the investment.
Benefits of Time Value of Money
Maybe you think that time value of money is a bad thing, but that's not always the case. Here are some ways to take advantage of this:
- Become a guide for determining the investment amount.
- Knowing when you should use money and for what.
- Knowing what investment instruments will be profitable in the future.
- Helping you choose the right savings product, for example deposits.
- Take into account the money you will have in the future with a financial plan.
- Regarding business, you can calculate production and innovation budgets.
- Calculate your profit opportunities in the future.
Time Value of Money concept
Summarized from MasterClass, based on changes in time and ways of looking at the value of money, there are three concepts of time value of money, namely:
Present value
Present value is the amount of money you need to invest now to get a certain profit in the future. Briefly the current value of money. This amount also serves as a benchmark for the amount of interest you will receive after investing.
Future value
Future value is a prediction of the amount of profit you will get based on a certain interest rate and duration. Briefly the future value of money. For example, based on present value, you invest IDR 100 million. By calculating high interest rates, you will get greater profits/future value.
Annuities
An annuity is additional income that you receive consistently over a certain period of time. For example, if you own a boarding house business, every month you will receive an annuity in the form of rent.
Time Value of Money Formula and Examples
To calculate the time value of money, you can calculate it based on each concept. Beforehand, you must understand the following terms:
- FV = future value/future value of money
- PV = present value/current value of money
- r = interest rate
- n = time period
After understanding the terms, here are the formulas and examples of calculations, citing BankRate:
Present value (PV) calculation formula and example
The present value formula is PV = FV / (1 + r)ⁿ.
Example of PV calculation: You have a savings target of IDR 25,000,000 within 3 years. You decide to create a deposit account with an interest rate of 10% annually. Based on the formula above, the calculation is:
PV = 25,000,000 / (1 + 10%)3
PV = 25,000,000 / 1.331
PV or money you have to prepare now = IDR 18,782,870
Formula and examples of future value (FV) calculations
The formula is FV = PV x (1 + r)ⁿ.
Example of calculating future value: if you save a deposit in a bank of IDR 15,000,000 with an interest rate of 10% annually. You have a plan to keep it for 3 years.
First year FV: 15,000,000 x (1+0.10) = 15,000,000 x 1.10 = IDR 16,500,000
Second year FV: 16,500,000 x 1.10 = Rp. 18,150,000
Third year FV: 18,150,000 x 1.10 = IDR 19,965,000
With the calculations above, it can be concluded that the total profit you will get in three years is IDR 4,965,000.
When should Time Value of Money calculations be used?
We recommend that you use time value of money calculations in the following situations:
- When you are considering whether to buy or rent a house, and the amount needed between the two.
- When calculating the amount of insurance premium you want to take and the investment amount.
- When starting an investment, including choosing an instrument, the initial investment amount, and the investment period.
- When considering buying a car, motorbike or other valuable items.
- When considering paying debt/credit or investment first with an annual bonus.
- When your company wants to acquire a smaller company.
- When your company wants to buy new equipment for production.
By understanding the time value of money, you can estimate the benefits of the money you have now if invested correctly.
Want to learn more about the time value of money and how to use it for future profits?
Join our short program and learn from the experts by clicking here now!
