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Congress Legalizes New Way To Raise Money For Your Business
Putting together a pool of money to get a new business idea off the ground is not easy. Fortunately, Congress legalized a new way to raise money for your business. Ordinary americans with dreams of opening their own restaurant or other type of business can now leverage the power of the Internet and social media to raise money.
Finding Business Start Up Capital Is Hard Over the years I have received a lot of questions from people asking how they can get a loan to start up a business. It might be a restaurant or a contracting business. It is very difficult to qualify for loans from banks when starting a new business. This is especially true if you haven't done it before. If your credit isn't perfect you have even less chance. There are loans available through the Small Business Administration but it's not as easy as it sounds.
Congress Legalizes New Way To Raise Money For Your Business Now there is a new option. You can use the internet to raise small amounts of money from a lot of people. This can add up to a lot of money. These people that back your idea become investors in your business. In November 2011 Congress passed a bill called the Entrepreneur Access To Capital Act. When you raise money from large numbers of people it is called "crowd funding".
The Entrepreneur Access To Capital Act caps individual investments at $10,000 (or 10% of the investor's annual income, whichever is lower) and limits your total capital raise to $2 million. This wasn't legal before. Now, ordinary Americans, not just wealthy investors can own a piece in a business. To help keep everyone honest, businesses that raise money using crowd funding must share audited financial statements with potential investors.
Crowd Funding Websites Prior to passage of this law, websites that facilitate crowd funding were already up and running, but with a slightly different twist. Artists, movie makers and musicians are using this technique to help fund projects. However, the twist is that investors (called backers) did not get an equity stake. Instead they received perks. For instance, if you invested $100 in a rock band's next album production, they would send you an autographed CD or other band swag like tee shirts and hoodies. With the new law in place investors can legally take an equity position in these projects.
Raise A Few Thousand Dollars To Launch Your Idea To see a good example, you could research a website called Kickstarter. Each month millions of people discover new projects. You can always start with people you know such as your friends and fans on facebook and other channels. If they like your project, they will help spread the word to their friends and fans. A good idea, communicated well, can spread fast and wide. On the website, the average pledge per person is $71, and the most common pledge is $25.
Funded projects include: Aunt Bett's Soul Food Restaurant (California) Fools For Rowan CD Production (Tennessee) Celebrities To Go Comedy Production (New York)
Access To Small Loans For Business Start Ups Whereas money raised through this type of site does not need to be paid back, there are services like Kiva which is a non-profit organization that gives you access to small loans to start up a business. This is called micro finance and it allows you the ability to raise a few hundred or a few thousand dollars. For example, if you have a hobby like making beaded jewelry and you think you could sell some pieces but can't afford to purchase more materials, you could go on Kiva. Simply create a borrower profile, upload a picture of your design, and people that like your product and that believe in your plan will lend you money.
Chase Your Dream This is America. Anything can happen and often does. People experience meteoric rise in popularity based on projects they do. Just ask Bill Gates or Mark Zuckerberg. Your idea for a movie, food product, or other type of business could be the next big thing. Using various crowd funding and microfinance tools can help you get your idea or hobby turned into a real business that you have a passion for.
Author Resource:-
Nathan Randall, editor, DailyDollar Newsletter provides free daily advice on money matters plus coupons and discount codes. FYI...you can now access the DailyDollar Newsletter via iTunes podcast, YouTube video, and on Facebook and Twitter too.
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