Are you considering using regulation crowdfunding to raise money for your business venture? If you are and would like to know more about regulation crowdfunding and why it is essential for you as an entrepreneur, you are in the right place. Before proceeding, note that crowdfunding has become an increasingly popular solution with startups and existing businesses. In fact, the global crowdfunding market has had such a positive impact that statistics predict it will hit $39.8 billion by 2026.
What Is Regulation Crowdfunding?
Regulation crowdfunding facilitates the provision and selling of securities by eligible companies. Anyone above the age of eighteen is allowed to buy these securities. Therefore, with regulation crowdfunding, offerings from private companies are open to the general public. This has changed things immensely. Before it became active, only select investors with the proper accreditations could purchase equity in a new business or play a part in the real estate sector. If this were still in effect, very few US citizens would be involved because, in 2020 alone, only 10.6% of all American households qualified as accredited investors.
Regulation Crowdfunding Rules
Regulation crowdfunding comes with several rules. First, all transactions are required to be web-based or online. Furthermore, mediators like funding portals and broker-dealers have to be registered with the US Securities and Exchange Commission (SEC) to handle these transactions. Moreover, regulation crowdfunding has a $5 million cap for all companies. Plus, a company is allowed to raise these funds over twelve months. During this period, the amount that non-accredited individuals can contribute is also limited. Finally, regulation crowdfunding also requires companies and startups to share any relevant information in filing with the SEC. Investors and the intermediary involved should also be kept in the loop.
How Does Regulation Crowdfunding Benefit You?
If you need capital for your business, regulation funding is one of the best ways to get it. With this solution, your fans, clients, and other investors from the general public can invest the funds necessary to help your business take off. Therefore, if you have an excellent idea, you no longer require financial connections or a ton of money to implement it and build a company.
As an entrepreneur, regulation lets you take complete control of offerings. That means you get to stipulate terms for the money-raising endeavor and set your preferred valuation. Plus, regulation crowdfunding doesn't force you to give up essential board seats to any investor, unlike other funding avenues.
Contact a regulation crowdfunding capital raising consultant to learn more.