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Can you get rich by investing in a small business? How to make money with crowdfunding

Posted at 6:45 PM, Jul 13, 2018

A way to make money by investing in a small business?

Most people hear investment and think "big bucks," but this won't cost much. That's if you get into investment crowdfunding.

For example, Crab Corner on Rainbow and Sunset is looking for funds to cover its patio through the site: Nextseed.

John Smolen, the owner of Crab Corner, says, "We have a great fanbase, and they always ask what they can help and what they can do."

So after being around for over eight years, he finally turned to their customers instead of a traditional bank loan. They're trying to raise $75,000, and so far dozens have invested raising one-third of their goal. 

"If they're going to go out to eat somewhere in town why not come to a place where they have a financial stake in," says Smolen.

In theory, this allows investors to make their money work for them. 

All you need to do is to sign up on Nextseed and put money in with options from $100 up to $10,000. Once you invest, you'll own a stake in their business and have the ability to cash out.

For example: If you put in a hundred dollars at Crab Corner with a 12.5 interest rate, you would get about $2.67 per month for four years which is a total repayment of $128.

That's only a $28 profit. But if the business thrives, you could bring home even more money.

There are hundreds of businesses and sites you can look into if you are interested in this venture.

Jeremy Aguero, Principal Analyst at Applied Analysis, says, "In terms of a loan which is essentially letting them borrow money with the expectation that you'll get that paid back, those are across the gamut. We've seen ones that are as low as 3, 4 percent and ones that are as high as 20 percent."

Experts say before you put cash in a business, you should understand the risks and do your homework.

"Find out what the company does, how the company does that, why they're using a non-traditional method to try to raise funds," says Aguero.

Got questions on choosing investments, processes, and risks? Click here for a full list of frequently asked questions with answers.