Reduces exposure
Some crowdfunding loans are as little as $5, which is useful, as any defaults on projects are compensated for, by interest gains elsewhere in the crowdfunders portfolio. Investor John Rampton who’s invested in several crowd funded campaigns says “Another way that crowdfunding reduces risk is by reducing the cost of inventory.
Let’s say in the past a clothing company would have manufactured 1000 pairs of jeans but sold 700 pairs. They still had to purchase the 1000 pairs and basically just take the loss on the jeans that weren’t sold.
With crowdfunding that same company knows ahead of time on how many pairs of jeans that need to be produced. Instead of wasting money on inventory that doesn’t sell, you only sell what’s been ordered.”
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