#title iii rules

[lendoor-blog]

Title III Crowdfunding - what does it mean for my small business

Title III Crowdfunding (also called crowd finance) will allow small companies in the US to raise up to $1million per year by selling equity or debt "mini securities"  in crowdfunding style campaigns on the internet. In practical terms, this means that any corner coffee shop can try to raise a loan from their regular customers and local community, thus circumventing the traditional lending institutions that have become ever more restrictive in their lending requirements. The businesses can advertise freely their financial offerings to anyone. Everyone can invest,  not just accredited investors which is currently the case.   

What does a small business owner need to do to crowdfund: 

-  pick a licensed crowdfunding portal (crowdfunfding website) to conduct the offering 

- prepare disclosure statements (templates typically provided by the portal)

- conduct a successful crowdfundning campaign (it is still a crowdfunding, it is not "free money on the internet")

- provide financial update each year to his/her's investors

- registered business is required, as well as passing a background check 

Title III Crowdfunding is going to become available to small business owners starting in the second quarter of 2016. This comes after three and a half years of waiting for SEC to adopt rules for the implementation of Title III of the JOBS Act (Jumpstart Our Business StartUps Act) that was signed in April 2012.  While most of the media buzz has focused on equity financing, where everyday people can invest in fledging new startups and hope to get an equity stake in the next Facebook, the reality is that very few of the 27 million small businesses in the US today are interested or appropriate for equity investing. Most of them just need a loan.

[lendoor-blog]

Title III Crowdfunding, Lendoor's perspective in American Banker

Lendoor's CEO Viktoria Krane talks frankly to American Banker Newspaper about her excitement and her concerns about Title III Crowdfunding rules that were adopted yesterday by SEC.

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The new regulations would seem to impose fewer burdens on small-business owners than the agency's 2013 draft rules contemplated. Still, it remains to be seen if crowdfunding will emerge as a viable source of financing for small businesses.

One problem is that many small businesses looking to raise either debt or equity online have little in the way of money or sophistication, and that can be a problem when trying to navigate complex regulations, said Viktoria Krane, the chief executive officer of Lendoor, a crowdfunding site.

"Not necessarily the next Facebook, but the next local auto mechanic," she said, describing the typical small business that turns to crowdfunding.

For such companies, which may be seeking to raise $20,000 to $50,000 in startup capital, the costs of complying with the SEC's regulations may not make financial sense, she added.

Krane founded New York-based Lendoor in 2013 with plans to become a national crowdfunding portal operating according to the SEC's rules. But as the agency dragged its feet, Lendoor changed its strategy and started operating in Texas, which had adopted its own crowdfunding rules.

Now the company is switching gears again, repositioning itself as a place for entrepreneurs to raise money from friends, relatives and other people in their social networks.

Because those fundraising pitches will not be open to the general public, the company will not be subject to the SEC's new crowdfunding rules.

"After two years of waiting, I would have expected to be a little bit more excited," Krane said. "But my feelings are mixed."

Read the full article here: http://hubs.ly/H01lMTm0.