Tag: Crowdfunding

Do You Feel Lucky? Everything You Need to Know About Crowdfunding for Business

Crowdfunding for business startup is just one of many options.  For some, crowdfunding is a foreign concept. In contrast, others know just what is happening.  If you are looking to start a business with minimal debt, crowdfunding could be the answer. If you’re lucky. 

Is Crowdfunding for Business Startup the Best Option or Is it the Luck of the Draw?

Still, it may not be the answer at all.  First, it isn’t cost free, though it does have minimal costs compared to some other options.  Truly, the main costs associated with crowdfunding for business are related to marketing your campaign in order to attract investors.  Yet, other costs include any fees charged by the crowdfunding platform. 

If you are lucky enough to meet your goal, you are golden.  Just imagine, all you have to do is live up to your campaign promises and you have no debt related to those funds.  However, if you do not meet your funding needs on the campaign alone, you are out those marketing costs and you still have to find additional funds. It’s a fine line to balance.

Crowdfunding for Business Credit Suite

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What is Crowdfunding?

The truth is, with crowdfunding for business, there is no need to limit yourself to just one or two large investors.  You can find a lot of investors to fund your business a few bucks at the time. In fact, some even kick in as little as $5.

Crowdfunding is a good starting point for a new business.  Still, it shouldn’t be relied upon completely.  Truly, you need a backup plan.  Unfortunately, only a small percentage of crowdfunding campaigns are successful.  Furthermore, consider how the economy is doing before you rely too heavily on crowdfunding.  If the economy isn’t strong, people will not be as likely to invest. 

Crowdfunding Platforms

There are many crowdfunding platforms, but they aren’t all exactly the same.  You have to check them each out and figure out which one will work best for your business.  We’ll start with the two most popular options. 

Kickckstarter

They are the largest crowdfunding for business platform. With over 14 million backers, they boast over 130,000 funded projects. These include products and services related to: 

  • Publishing
  • The arts and film
  • Comics and illustration
  • Design and tech

With Kickstarter, you must have a prototype. In addition, projects cannot be for charity.  However, nonprofits can use Kickstarter.  Also, you are not allowed to offer equity in a company as a perk. 

Other banned projects and perks include anything to do with:

  • Contests and raffles
  • Cures and medicines
  • Credit services
  • Live animals
  • Alcohol
  • Weapons

Creators collect a 5% fee on all funds.  They also use a payment processor, Stripe, that applies payment processing fees (roughly 3-5%). Unsuccessful campaigns do not pay a fee. There are also fees of 3% + $0.20 per pledge. Pledges under $10 have to pay a discounted micro pledge fee of 5% + $0.05 per pledge.

Indiegogo

Indiegogo has over 9 million investors. The minimum goal they allow campaigns is $500. They charge 5% platform fees and 3% + 30¢ third-party credit card fees. It is important to note that fees are deducted from the amount raised, not the goal. As a result, if you raise more than your goal, you will pay more in fees. PayPal is not accepted.

Indiegogo is noteworthy because they offer flexible financing in addition to fixed financing options. So, if you do not make your goal and you chose flexible funding, you can at least hold onto what you collected. This is the opposite of how crowdfunding normally works.

You cannot change your fundraising structure from fixed to flexible, or vice versa, once the campaign starts. They recommend fixed funding if you need a minimum amount for your project. Indiegogo recommends regular communications to donors if you choose fixed funding.

RocketHub

RocketHub is better suited for those who need venture capital. They give you an ELEQUITY Funding Room. There, you can pitch your idea and see if it stimulates any interest from donors.

This platform is specifically for business owners working on projects related to: 

  • Art
  • Business
  • Science
  • Social

If you achieve your fundraising goal, you will pay a fee of 4%. In addition, you’ll pay a 4% credit card handling fee. But if you do not reach your goal, then that fee jumps up to 8% plus the credit card handling fee. That means RocketHub is best for companies that

 are more confident they will make their goals.

Crowdfunding for Business Credit Suite

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CircleUp

CircleUp aims to help emerging brands and companies raise capital for growth projects. However, companies must apply and show revenue of at least $1 million to get a listing on the site. That said, the platform will sometimes make exceptions.

CircleUp can be good for those who already have a somewhat established business. That includes business owners who want both funding and guidance in order to take their businesses to the next level.

If your business gets approval for listing on CircleUp, the fee percentage comes from the total amount you raise. 

GoGetFunding

GoGetFunding has been around since 2011. They let fundraisers keep the money they raise, regardless of whether they meet their target. If your business idea is unproven and you are unsure of whether you can meet your funding needs with a crowdfunding for business campaign, flexible funding can be a great option. 

They charge a 6.9% fee. This is pretty high, but it includes both the platform fee and the payment processing fee. Therefore, it is actually more cost-effective than many other crowdfunding for business options.

Crowdfunder

With Crowdfunder, investors purchase equity in promising companies. They consider campaigns to be deals, and its donors are investors. Basic listings are $449/month. Self-start listings are $499/month. Self-start plus is $999/month.  In their community, there are over 15,000 investors and 200,000 startups.

Fundable

This is a crowdfunding for business platform that allows companies raise funds from investors, customers, and friends. They have over $80 million in funding commitments.

Fundable does allow equity campaigns. Also, they charge $179 per month to raise funds. Fees on rewards are: 3.5% + 30¢ per transaction. They do not charge success fees.

Fundly

Fundly allows for crowdfunding for creative ventures. If your business has a creative lean, this might work for you.

There is no minimum amount to fundraise or to keep money you raise. You can usually withdraw payments within 24 – 48 hours of the donation. In addition, they offer automatic transfers. It is free to create and share an online fundraising campaign. 

Yet, Fundly will deduct a 4.9% fee from each donation you get. A credit card processing fee of 3% is also taken out from each donation. Also, there are nonspecific automatic discounts for larger campaigns.

Successful Crowdfunding Campaigns

A lot of times crowdfunding for business is not successful.  There are some campaigns that find their proverbial gold at the end of the rainbow however.  Consider these examples. 

Pebble SmartWatch 

They actually have more than one of the top 10 campaigns ever on Kickstarter. Their 2nd campaign is one of the highest funded ever.  It hit over $20,000,000. That’s not too bad considering their goal of only $500,000. 

They eventually sold to FitBit. 

FlowHive 

The FlowHive Indiegogo campaign caused quite a buzz. The idea was to find a way to get the honey from bees without causing the bees harm. 

Traditionally, they just break open the hives to get honey. However, this process can kill the bees. FlowHive developed a fake hive.  It is made from reusable plastic. Bees make honey in it, and the honey flows out through a spout. The bees are safe and fresh honey is readily available.

It seems beekeeping is growing in interest. This campaign raised $14,000,000. Though they won’t let on as to what the exact numbers are, those in charge say they are still turning a profit. 

Crowdfunding for Business Credit Suite

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CoolestCooler 

The coolest cooler was a super cool Kickstarter campaign that brought in over $13,000,000. The cooler had bluetooth and a blender among other things. Investors got one  for their donation toward the cause. 

This campaign did run into some trouble when it wasn’t able to deliver rewards as quickly as promised.  There was actually a lawsuit. In the end, everything worked out and everyone got what they were promised. 

The CoolestCooler group says they are glad to put that behind them and get back to work. You can still buy one today. 

Kingdom Death Monster 1.5 

A lot of people jumped in on this one, to the tune of $12,000,000 on Kickstarter for this surprisingly popular board game. It did take a while to get going, but investors finally got their copy. After production was over, resale values skyrocketed upwards of $1,000 per game. A later campaign promising updated material did just as well. 

BauBox Travel Jacket 

This jacket boasts 10 different design elements, like a drink holder and a neck pillow. They raised over $11,000,000 across 2 campaigns. While it had a rough start, including the jacket being available on retail sites before investors even got theirs, it is still selling today.

How to Launch a Successful Crowdfunding for Business Campaign

There is no such thing as guaranteed success.  Luck truly has an awful lot to do with it. In lieu of catching a leprechaun however, these steps can help make sure you give yourself the best chance possible when it comes to crowdfunding for business. 

Do the Research 

You have to know your market and what demand looks like.  The only way to find that out is to research. Figure out how much money you actually need before you set your goal. Lots of business owners have started crowdfunding campaigns only to find the demand isn’t there or their goal fell short of the actual need.

Create a Prototype

For products, you need to have a sample to show investors. This is important. People are much more likely to let go of money if they can see something tangible. This is so vital that Kickstarter actually mandates that you to have a prototype to show potential investors

Consider Your Platform

Once you know who your target audience is, you can determine if you would be best served by Kickstarter, Indiegogo, or another successful platform that is not as well known. If your audience doesn’t use the platform you are on, it won’t matter how great your idea or product is. They’ll never see it.

Give Awesome Incentives

This is huge.  Be sure you can deliver on your promises.  Yet, don’t give away the company. Still, if someone one is going to help you get started, they deserve something amazing.  Offer more than a thank you note. Be bold with what you offer as a reward for their support, without harming your success.

Set a Goal

Setting attainable goals is necessary to success. Make certain you look at the numbers in relation to actual facts before you set a fundraising goal. Be certain you have production facilities on the line that can meet the timeline goals. Do not randomly set goals with no clue what it will take to reach them.

It’s All in the Marketing

You can’t just willy nilly throw a campaign together. If you create a video, it needs to be professionally edited. Any social media should be specifically targeted toward your audience. If they are a cheesy, audience, then that is how your social media and videos need to be.  A more sophisticated audience will need a different feel. 

Be Realistic About Crowdfunding for Business

Keep in mind, when it comes to crowdfunding,  you need a backup plan. Don’t count on rainbows and leprechauns.  Honestly, there are far more unsuccessful campaigns than there are successful ones.  In fact, competition is fierce. It’s definitely worth trying, but remember that you are likely going to need other types of funding as well. 

Finally, you need to work on building fundability.  That is the ability of your business to get funding.  Everything from traditional business loans to business credit cards and lines of credit require a business to be fundable for approval.  Furthermore, part of being fundable is having great business credit, which also requires a specific process to build.  Do not neglect fundability and business credit while your crowdfunding campaign is running.  Those funds will only last so long, if you even get enough to get started.

The post Do You Feel Lucky? Everything You Need to Know About Crowdfunding for Business appeared first on Credit Suite.

How to Get a New Small Business Loan  and Why It’s Better Than Crowdfunding   

Why It’s Better Than Crowdfunding

When you own a business there is only one thing for certain.  You are going to need funding.  Where you get that funding is another story.  There are a ton of options, and choosing the one that will work best for your needs is sometimes the most difficult part.  Two of the most common options are small business loans and crowdfunding. For most, a new small business loan is going to be the best bet.  We’re going to tell you how to get a new small business loan, and why it’s a better choice than some other funding options, specifically crowdfunding.

How to Get a New Small Business Loan: Business Funding Options

First, it can be helpful to know what your options are.  There are many, but all are not created equal. Complicating things even more, there are multiple subtypes within many of the different available types of funding. Here is a quick overview.

Loans

This is money that you borrow and pay back over time, plus interest.  The rate of interest, time you have to pay back the money, and the requirements to qualify for the loan vary widely between loan types and lenders. All of the variance is why many are so unsure of how to get a new small business loan.

Demolish your funding problems with our rock-solid guide about 27 killer ways to get cash for your business.

Lines of Credit

If you are trying to figure out how to get a new small business loan, there is no doubt you are going to start wondering about lines of credit also.  A line of credit is similar to a loan in many ways.  You apply for it the same way, generally through the same type of lender.  The difference is that this is revolving credit, similar to a credit card. You only pay back what you use, and you use only what you need.  The funds are there to draw from. But you do not have to pay back the full amount.   Typically, the interest rates and terms are better than that of a credit card.

Factoring

Invoice factoring, or receivables factoring, is sort of a cash advance on outstanding accounts.  If you need cash and have a ton of outstanding invoices or receivables, you can factor them and collect a portion of the cash.

The lender will pay you the value of the invoices, less a premium, and then collect cash on those accounts from the customers directly.  The older the account is, the higher the premium is because there is a greater risk they will not collect. Therefore, if most of your accounts are 60 days or less, you may want to increase collection efforts on your own first and see what you can get.

Credit Cards

Most everyone knows how credit cards function.  They are revolving credit, just like a line of credit.  The difference is generally a higher interest rate, and sometimes there is an annual fee.  One point that team credit card gets, though, is that some of them offer rewards such as cash back or airline miles.

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Crowdfunding

Crowdfunding is a way to raise money for your business through investors.  These are not your standard investors though.  You choose a platform, like Kickstarter or Indiegogo, and create a campaign for your business.  Platform users can then choose campaigns they wish to contribute to.  Contributions range from $5 to $5,000 or even more. This is completely free money that you do not have to pay back, though you may need to offer an incentive or profit sharing of some sort to your investors.

Angel investors

These are investors, but they often function differently that regular investors as well.  There are angel investment firms, where you can present a pitch and see what happens, but also a friend or family member can be an angel investor.

Grants

Grants for small business are just like grants for school.  They are free money that you do not have to pay back.  Sometimes they come in the form of an award for some type of contest. Competition can be fierce when it comes to grant funds.  There is only so much money to go around and everyone wants it.

Grant funds are also often reserved for specific types of businesses based on who the owner is or the mission of the business.  For example, a grant may be specifically for businesses that are environmentally minded, or for those businesses run by veterans, minorities, or women.

Which Funding Option is Best?

If you were wondering how to get a new small business loan, you may not be wondering if crowdfunding is better.  Upon first glance it can appear that this is the case. Free money is always best. And if all you have to do is convince people to give, that’s even better, right? Crowdfunding offers seemingly unlimited free funds.  You can collect whatever the people will give.  In theory, this is true.  If you look just a little deeper however, below the surface, there are some details that may surprise you.

First, you need to know that all crowdfunding platforms are different. The rules for how long a campaign can run and when you can collect your money vary from platform to platform.  For example, Kickstarter will not allow you to collect your money until your reach your goal.  If you do not reach your goal, you do not get any money.  Indiegogo, on the other hand, allows you to choose if you collect as you go, or after you meet your goal.

The problem then becomes predictability.  If you have time to sit back and leisurely raise money, this may work.  Still, most people who need business funding need it like, yesterday.  Waiting around for a campaign to reach its goal, or even collecting small amounts here and there will probably not cut it.

Another issue is the incentive that is often required.  While incentives can range from a free product or some bauble like a keychain or even a thank you note, the most successful ones are substantial.  More than one business has found itself in trouble trying to make good on crowdfund campaign promises.

What You Need to Know

Loans are truly a better option for most, so you do need to know how to get a new small business loan when the time comes.  They are  predictable and, while you do have to repay with interest, you have some control over the terms and rates.

Not only that, but those payments can help you build credit.  That, in turn, will allow you to get better terms and rates, as well as potentially more money in the future. In addition, an institution where you already have a loan will be more likely to approve you for additional loans, assuming you consistently pay on time.  Running a second crowdfunding campaign may not be as fruitful, even if you have success with the first one.

How to Get a New Small Business Loan

The process of getting business loans can be overwhelming.  We break it down for you so you can get the funds you need to start or grow your business as soon as possible.

Shop Around

The first step when considering how to get a new small business loan is to shop around.  Find a lender that has the loan product that best fits your needs.  Find the loans with the best terms and interest rates, then check their eligibility requirements to see if you apply.  There are a few different types of lenders you can choose from.

  • Large banks
  • Smaller community banks
  • Credit Unions
  • Online Lenders

Which one you choose will depend on a number of factors.  Large banks do not typically work well with small businesses. But that does not mean you shouldn’t see what they have to offer.  In general, small banks and credit unions will have the best terms and rates, in that order, but the process can still be lengthy.

Demolish your funding problems with our rock-solid guide about 27 killer ways to get cash for your business.

If credit or timing is an issue, online lenders may be the best bet. While their interest rates are not typically as low, they are often more flexible on minimum credit score than traditional lenders.  The option with most to do the entire application online means you can get your funds quicker as well.  In some cases you can get funds in as little as a few days with approval in as little as 24 hours.

The Small Business Administration

It is impossible to figure out how to get a new small business loan without a discussion about The Small Business Administration, or SBA.  This is a government agency that offers support and resources to small businesses.  Though they do not directly lend funds, they do work with local lenders to help small businesses get the money they need.

When you are looking at how to get a new business loan, you definitely need to consider researching lenders that work with the SBA.  While not all small businesses will benefit from an SBA program, many will.  Their programs are meant to make it easier for businesses that may not qualify for loans on their own to get the funds they need.

Pay Attention to SBA Loan Programs

You can’t figure out how to get a new small business loan without knowing what programs the SBA offers.  There are those meant specifically for working capital, as well as those designed more for equipment and real estate purchases. Following is a breakdown of a few of the most popular SBA loan options.

7(a) Loans

This is the Small Business Administration’s main loan program. It offers federally funded term loans up to $5 million. The funds can be used for a number of things including:  expansion, purchasing equipment, working capital and more. Banks, credit unions, and other specialized institutions in partnership with the SBA process these loans and disburse the funds.

There is a minimum credit score requirement of 680 to qualify.  In addition, they also require a down payment of at least 10% for the purchase of a business, commercial real estate, or equipment. A business must have been in operation for 2 years to qualify. In the case of startups, business experience equivalent to two years will work.

This is the most popular of the SBA loan programs. Funds are available for a broad spectrum of projects, from working capital to refinancing debt, and even buying a new business or real estate.

504 Loans

504 loans are available for up to $5 million.  Funds from these loans can buy machinery, facilities, or land. They are generally used for expansion, and private sector lenders or nonprofits process them. 504 loans work especially well for commercial real estate purchases.

Terms range from 10 to 20 years, and funding can take from 30 to 90 days. The minimum credit score is 680, and collateral is the asset the funds are financing. There is also a down payment requirement of 10%, which can increase to 15% for a new business.

This loan requires you to be in business for at least 2 years, the same as the 7(a) program, or management has to have equivalent experience if the business is a startup.

Microloans

Microloans are available in amounts up to $50,000. They are best for starting business purchases such as equipment, inventory, or just general working capital. Community based non-profits administer microloan programs as intermediaries, with financing coming directly from the Small Business Administration.

Interest rates on these loans are 7.75% to 8% over the lender’s cost to fund.  Terms go out to 6 years. They can take 90 days or more to fund. The minimum credit score is 640, and the collateral and down payment requirements vary by lender.

SBA disaster loans

Available in amounts up to $2 million, these loans are actually processed directly through the SBA. They are available to small-business owners that have been affected by natural disasters.  Terms go up to 30 years. The maximum interest rate is 4%. You can apply for disaster loans directly at SBA.gov.

Demolish your funding problems with our rock-solid guide about 27 killer ways to get cash for your business.

The minimum credit score for disaster loans is 660. Collateral is necessary if the loan goes over a certain amount, usually $25,000.  If collateral is not available at the time, then it is can wait until it becomes available. For a military economic injury disaster, the amount at which collateral is necessary increases to $50,000. A down payment is not a requirement either way.

SBA Express loans

Express loans from the SBA max out at $350,000.  Interest rates are capped at 11.50%. Terms range from 5 to 25 years.  The SBA guarantee is less than with their other loan programs at 50%. You must have a credit score of at least 680 to qualify.  If your debt-to-service ratio is less than 1:1, you will not be eligible. Depending on the lender, there may be a collateral requirement for loans over $25,000.

They are not called express loans for nothing.  The turnaround time is substantially faster than others, with the SBA taking up to 36 hours to give a decision. There is less paperwork with the application process as well, making express loans a great option for working capital, among other things, if you qualify.

SBA CAPLine

There are 4 different CAPLine programs that vary mostly in the expenses they can fund. Each allows a maximum amount of $5 million and an interest rate that ranges from 7% to 10%. It can take 45 to 90 days to get funding.

The four different programs are:

  • Seasonal CAPLines – Financing for businesses preparing for a seasonal increase in sales.
  • Contract CAPLines – Financing for business that need funding to fill a contract.
  • Builder’s CAPLines – Financing for businesses taking on a real estate or construction project.
  • Working capital CAPLines – Financing for businesses that are struggling with a short-term slump in sales.

You must have at least a 680      credit score to apply. But there is no minimum time in business requirement unless you are getting a seasonal CAPLine, which carries a one year in business requirement.

SBA Community Advantage Loans

This is a pilot program set to either expire or extend in 2020. It’s designed to promote economic growth in underserved markets. Credit decision makers overlook factors such as poor credit or low revenue if the business has the potential to stimulate the economy or create jobs in underserved areas.

Loan amounts range from $50,000 to $250,000 with a maximum interest rate of 11%, while terms range up to 25 years.

How to Get a New Small Business Loan with Other Programs

The SBA also offers these additional programs that may be helpful.

  • Veterans Advantage– General-use business loans with no guarantee fee for majority veteran-owned small businesses.
  • International Trade– General-use financing for businesses actively involved in international trade or hurt by competition from imports.
  • Export Working Capital Program– Short-term working capital for exporters backed by invoices or other business assets.

How to Get a New Small Business Loan: Be Prepared

After you choose which loan or loan program will work best for your business, it’s time to dig in.  Unless you are using an online lender where the entire application process takes place online, you are likely going to spend a significant amount of time on this process.

Regardless of the lender, preparation is key to time savings and success.  While all lenders are different, some information is pretty standard across the board. You almost always need to have ready information related to:

  • Past 3 years tax returns (business and personal)
  • Business financial statements for the past 3 years, or 3 years’ of projections for startups.
  • A professional business plan.
  • A budget for the loan funds.

Of course, this is not an exhaustive list, but having these things ready to go will save you significant time during the application process.

Keys to How to Get a New Small Business Loan: Shop Around

There is no doubt that, for many reasons, a business loan works better than crowdfunding in almost every case.  It is both more reliable and more predictable.  Very few crowdfunding campaigns work out, while there are lenders with loan products for almost every situation.

Rather than creating elaborate crowdfunding campaigns, spend your time researching lenders and loan programs that best fit your needs.  Once you find what you are looking for, gather the information you know they will need, and be prepared to provide anything else they may ask for.  This is a great place to start when trying to figure out how to get a new small business loan.

The post How to Get a New Small Business Loan  and Why It’s Better Than Crowdfunding    appeared first on Credit Suite.

How Equity Crowdfunding for Real Estate Investors Can Help You Sleep at Night

Banish Nightmares with Equity Crowdfunding for Real Estate Investors

Real Estate investing can be scary. There are so many unknowns. All investments are risky, but being stuck with property that does not generate profit is a nightmare all on its own. There are many things to consider in a real estate endeavor. Some of them you may have thought about. For instance, do you want to invest in residential or commercial property? Others may not have crossed your mind. Equity crowdfunding for real estate investors is probably not running through your brain regularly. You can sleep peacefully and avoid the nightmares just by accessing a little information. Knowing what you are getting into and what your options are can work wonders for your peace of mind.

Stretch Your Mind

One thing that can help you get a good night’s sleep is doing stretches before bed. Stretching relaxes the muscles. It also helps avoid the twitching that can come with restless leg syndrome. Another benefit of stretching is that is prepares your mind and body to wind down.

When you begin to think about real estate investing, before equity crowdfunding for real estate investors can even be an option, you will need to stretch your mind to consider all the possibilities.

Make sure to check out how equity crowdfunding for real estate will help your company.

Residential Real Estate

There are two types of residential real estate investments. You can invest in property to re-sell for a profit, or you can invest in rental property.

Property for resale typically refers to house flipping, which is tricky. You have to find a home in a location that will sell. There has to be a balance between the work that needs doing and the resale price. A lot of things have to fall into place. Despite all of this, many people make a successful living flipping houses.

Rental investments include either single family homes, apartment buildings, or duplexes. Improvements may be necessary depending on the situation. It is important to be sure any improvements actually add value however. There is a break-even point where you will not be able to get the cost of improvements back through rental income.

Commercial Real Estate

There are a couple of sides to this. There are commercial real estate investors that purchase property for commercial use. These are the people building shopping centers, strip malls, and buildings for businesses. Most often they are companies rather than individuals.

The companies still need funding for their real estate endeavors. Thanks to the JOBS Act of 2012, they have a new way of getting that funding. It not only helps them, but it also lets individuals enjoy the benefits of commercial real estate investing. That does not sound like much, but previous to this it was very difficult for individuals to break into commercial real estate investing due to the high cost. What is this awesome new dream come true you ask? That would be equity crowdfunding for real estate investors.

Location, Location, Location

You are going to sleep better in a place that is meant for sleeping. Moreover, you are going to sleep better in your own place meant for sleeping. The best sleep comes in your own bedroom and you own bed. However, if your options are a hotel room and your car, the hotel is going to be the next best option, because its purpose is sleep. Location matters when sleeping, and it matters in real estate investment.

You have to consider the location of the property when making your investment decision. Flipping a house that is in an area no one is buying in is not a good idea. Even the most amazing house in the world won’t sell if it is in a high crime area, flood plain, or other unfortunate place. Even if it does sell, the price will likely have to be so low you incur a loss.

The same is true of rental property and commercial property. An apartment building in a college town or metropolis is a no brainer. An apartment building in a town of less than 2,000 may bear more thought. It could work, but there are many things to consider.

With commercial property, you have to think about whether the economy of the area will support the new business level.

Be sure to check out how equity crowdfunding for real estate will help your company.

Consistency

Any sleep expert will tell you than a consistent bedtime routine is important, regardless of age. The same is true when it comes to real estate investment. You need to find your niche and stick to it. If you are going to flip houses, flip houses. If you are going to be a landlord, do that. Commercial property investment your thing? Stick with it.

It is almost always impossible to do everything. It is impossible to do everything well. Pick one area of real estate investment and stick to it.

Ingredients Matter

There are some ingredients in the things we eat and drink that can cause problems with sleep. Choosing food that is good for you is necessary for keeping nightmares away. The same is true for real estate investing. You get out of it what you put into it, and where you get your funding can make a difference.

What are your funding options? You can self-fund, which isn’t an option for most. In the past, the only other option was financing. There are plenty of real estate lending products available from various sources.

Thanks to the JOBS ACT of 2012 however, there is now a new ingredient on the list. That is equity crowdfunding for real estate investors.

How Does Equity Crowdfunding for Real Estate Investors Work?

private equity crowdfunding

What is equity crowdfunding? How does equity crowdfunding work? To understand how this funding option works, you need to understand how crowdfunding itself works. With the JOBS Act of 2012, small businesses gained relief from a lot of requirements in place by the SEC. These requirements held many businesses back.

The Act allows for open investing options that do not require investors to register with the SEC. This applies as long as they meet certain guidelines. Thus, crowdfunding platforms are born. For entrepreneurs looking to “kick start” their business idea, you now see sites such as Kickstarter and Indiegogo. These sites allow individuals to post a business idea and accept investments as low as $5 and as high as, well, the sky’s the limit. In return, investors receive some sort of reward. It may be a some of the profits, a free product, or any number of things. It is often a reflection of the level of investment. Today there are tons of crowdfunding platforms all over the internet.

Real Estate Equity Crowdfunding

Though similar to crowdfunding for small businesses, it isn’t exactly the same. Most of those that list on real estate crowdfunding sites are commercial real estate businesses. They are seeking funding for their endeavors. Regular Joe’s can invest in a commercial real estate portfolio. This is similar to investing in a stock market portfolio. Then they can enjoy the returns without actually buying an entire piece of commercial property.

In this way, commercial real estate investors can raise equity and avoid a loan. At the same time, individuals can enjoy the benefits of commercial real estate investing for as little as $500.

Top Equity Crowdfunding Sites for Real Estate Investing

There are many equity crowdfunding platforms for real estate investors. These are just a few. It will take some research to figure out which one will work best. When deciding, be sure to take into account ease of use and the lowest possible investment level, among other things.

· Crowdstreet

The options and training with this one are what make it top of the line. You can choose from portfolio or direct investing. It is also easy to make decisions with confidence because they offer a lot of training material for investors.

The lowest investment for portfolios is $25,000, but the minimum for direct investing varies.

· RealCrowd

The best part about RealCrowd is that you can browse offerings before you sign up. The information includes minimum investment and average returns. This allows for a lot of the decision making to happen before you even log in.

· Fundrise

Fundrise is a great starter site for those that want to break into the world of equity crowdfunding for real estate investors. The number one advantage of this site is that the minimum investment is $500. They also have lower fees than many other sites.

There are a lot more sites that have a wide range of options and advantages. It would definitely be worth it to take some time to look at them and figure which one will work best for you. This is true whether you are a company seeking funds or an individual looking to invest.

Take a look at how equity crowdfunding for real estate will help your company.

Benefits of Equity Crowdfunding for Real Estate Investors

On the property owner’s side, there are many benefits. The top one is the ability to raise funds without debt. This is the same reason crowdfunding is a popular way to fund a small business startup. It isn’t free money. There are fees and profit sharing involved. It is often substantially cheaper than borrowing the funds, however.

For individuals, this is a great alternative to stock market investing. The returns are generally larger and more consistent. The minimum investment can be very manageable. Those sites that have a higher minimum investment are options for investors looking to cash out current investments or retirement funds. They can try out a new option.

A Word about the JOBS Act

This plays such a huge role in the equity crowdfunding for real estate investors topic that it bears mentioning the background briefly. The official title is “Jumpstart Our Businesses Act of 2012.” By design, it relieves small businesses of many of the stringent requirements put forth by the SEC. President Obama is the one who put his signature on it back on April 5, 2012. It releases some restrictions on raising capital, including allowing small businesses to go public with less than $1,000,000 in annual revenue. It also increases the validity of crowdfunding for both startup and real estate investing.

Other Ways to Avoid a Real Estate Investment Nightmare

Play by the Rules: Know the Equity Crowdfunding Rules

Always be honest. Because lying and cheating will keep anyone up at night. So much of real estate investing depends on referrals. You will not get referrals if you are do not practice integrity in your business.

If you are a landlord, be a good one. If you build commercial property, don’t cut corners. The same thing applies if you are flipping houses. Do not accept bad work to save money. Make sure your contractors do the best work they can so that buyers, investors, and renters get what they pay for.

Stay Informed

Nothing can keep a person awake at night like not knowing what you don’t know. While ignorance is bliss, the thought of the unknown can be terrifying. Educate yourself continually on real estate market trends, housing trends, and more.

Know the Market

Speaking of the market, you need to know it inside and out at all times. You should be intimate with it. In fact, if reading puts you to sleep, you can make reading about your corner of the market at the top of your reading list each night.

Sleep Tight, and Don’t Let the Bedbugs Bite

Equity crowdfunding for real estate investors has opened up a whole new world for many. The average Joe can now earn a nice passive income. Real estate investors have an alternative funding option, and it is often more manageable than financing.

If there is a gap, there are plenty of business credit funding options still available as well. Many lenders offer real estate investment loan products with credit score requirements as low as 600. Interest rates vary, and due to the nature of the industry, terms are typically 13 months to two years.

If you are looking for financing to supplement your equity crowdfunding for real estate investors options, be sure to shop around, the same as you would shop around for a crowdfunding site. Do your research so you can choose the best option or combination of options for your needs.

 

 

 

 

 

 

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