When the bank turns down a loan request from a small or medium sized business or start-up, where can they turn for financing? Many alternative funding options are available, but one that is gaining attention and notoriety lately is equity crowdfunding.
Crowdfunding refers to “unsophisticated” investors buying shares of a company online, and was only recently made legal under Congress’s JOBS Act. Under the JOBS Act businesses would be able to raise up to $1 million each year online, without having to register with the SEC.
While this source of financing looks promising for start-ups, the rules have not been officially set by the SEC or Finra. Businesses seeking crowdfunding are frustrated by the delays, but securities trade groups warn that crowdfunding without proper rules and oversight could result in amateur investors getting duped out of money.
The SEC is supposed to make a decision in January, but due to the Agency Chairman stepping down last Friday, the process will likely be delayed even more.
For the full article, see Stalled Crowdfunding Rules Leave Business Plans on Ice