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TheStreet Open House

Businesses, Brushed Off by Banks, Look to Customers for Funding

NEW YORK ( TheStreet) -- Time is tight for a/perture cinema.

The art-house movie theater in Winston-Salem, N.C., needs $50,000 to snag a lease to rent the lower level of the building that will open up space for an additional screening room and larger lobby.

But the owners are tapped out. The business' long-term debt includes a recent bank loan that is funding an expensive film-to-digital conversion.

So a/perture cinema is trying something new to find financing. The art-house is asking its customers, fans, friends and family, and other independent cinema enthusiasts to contribute to a crowdfunding campaign on Indiegogo.

"It's kind of now or never, so we need to get the community behind us and those who just want to keep art-house theaters open around the country on board," curator Lawren Desai says.

>>>4 Crowdfunding Cautions for Small Businesses

As more small businesses turn to alternative funding strategies, crowdfunding is growing in appeal.

"Plenty of filmmakers are using crowdfunding as a way to finance their projects," Desai says. "We show some of those films and so we thought, why not? We should try out the model. We have great perks to give away, we are a community-minded business and we have a good story."

So far, U.S. businesses have been able to use only donation-based crowdfunding, in which enthusiasts and do-gooders, in exchange for contributions, are given "rewards" or "tokens," such as a first-edition copy of a product. In the case of a/peture cinema, patrons will get public recognition depending on the pledge amount.

But next year, crowdfunding in the U.S. is expected to take a leap to allow for individuals to make investments -- as opposed to contributions -- in small businesses. Rules to allow accredited investors are far along, but the intention is to eventually make it so that the general public can invest a few hundred or a few thousand dollars into their local businesses.

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