If joining a band contest fills you with dread then you should reconsider as it might be the best thing you do. Taking part in this particular contest may very well be the reason for launching the career of your band. Competitions give unsigned bands the publicity they must help them to raise their following and get their music over to a wider target audience, so even if they don't win they're going to still get new fans and elevated exposure.
Your band may only be used to playing small gigs and casual sessions but by taking the step to walk out on the stage at an organised and well publicised music festival you can reap many benefits including getting together with other artists that have exactly the same aspirations for success and playing your music for a diverse audience who may yet turn out to be fans of you along with your music.
Contests give unsigned bands from over a variety of musical genres the chance to come together and play their music for the live audience. If nothing else, it is an experience in itself to take part and tune in to the wide variety of music on offer. Festivals offer the probability to talk to other artists and possibly make plans for future partnerships - which will be benefical to both artists involved as they may benefit from the exposure to each other's fan bases.
Taking part in a band contest may appear scary to start with even so you should consider the fact that all of the other entrants almost certainly feel the same. They are unsigned bands trying to get recognised in the hope that they'll secure a recording contract so performing well is a thing everyone will be concerned with.
Ultimately it is all about having a good time and letting your music do the talking. When you have fun and play to the best of your ability then you've done all anyone could ask and no one knows, this music festival which you were apprehensive about entering could just end up being the kick off point in a really prosperous musical career.