Equity crowdfunding is generally an alternative source of financing for private companies. It is a process whereby the investors put their money towards the company itself, having a partial interest/ownership and where they stand to get profit if the company does well.
There are few important key points to know before entering into Equity Crowdfunding:
1. The company is SEC approved.
Both investors and entrepreneurs should take into consideration the legality attached to equity crowdfunding. The Securities and Exchange Commission already approved the selling of securities through crowdfunding. With the new rules opened, the entrepreneurs found a way to invest in buying stakes and connect with some investors as well. A private company can go on line introducing itself with the goal to attract investors who are also looking for opportunities on line.
2. Other countries set their success.
In areas where equity crowdfunding has been seriously taken as an opportunity for businesses, its growth has escalated rapidly. This is welcoming to those countries who are just starting to embrace equity crowdfunding as a tool towards a successful business. While others are into competition, new companies can gain an edge by setting up a profile as soon as possible with more knowledge of what equity crowdfunding really is.
3. Open Market.
With equity crowdfunding, there are no accreditation requirements for investors. That means anyone can invest. Once the profile has been introduced on these sites, investors who are looking for opportunities will be directed to the business itself.
4. Create a solid business plan.
With crowdfunding, a business can operate with only marketing and manufacturing plans, but there are investors who will seek for more information on the business before investing on it. The more detailed your information is, the more investors will be attracted to take a leap.
5. Funding limits and Regulations.
Even if the SEC has approved equity crowdfunding, it comes with funding limits. Investors who has an income of less than $100,000 annually can invest $5,000 or 5% of their income. For those making more than $100,000 a year, it increases to 10%. As a business, you still have to deal with the SEC regulations. However, investors and owners should not stop their efforts just because of this regulated process.