Regulation Crowdfunding (also known as Regulation CF or Reg CF) was established under Title III of the Jumpstart Our Business Startups (JOBS) Act, which was signed into law in 2012. It allows real estate companies to sell securities, such as equity or debt, to investors through online platforms, and it allows investors to buy securities in these companies through these platforms.
The goal of Reg CF is to make it easier for businesses and startup projects to access capital and for investors to participate in the early stages of a company's growth. There is a maximum limit of $5,000,000 that companies can raise in a 12-month period from both accredited and non-accredited investors. Accredited investors are individuals or entities who meet certain financial thresholds, such as having a net worth of over $1 million or an annual income of over $200,000. Non-accredited investors are individuals or entities who do not meet these financial thresholds.
Reg CF provides a number of benefits for real estate companies looking to raise capital online. Some of the main benefits include:
Access to a wider pool of potential investors: Reg CF allows companies to raise money from a large number of people, which can be especially helpful for new projects that may not have access to traditional sources of funding.
Greater flexibility: Reg CF offers companies more flexibility in terms of the types of securities they can offer and the amount of money they can raise.
Lower barriers to entry: Reg CF has lower barriers to entry compared to other types of securities offerings, making it more accessible for smaller investments.
Increased transparency: Companies raising capital through Reg CF are required to disclose certain information to investors, which can help increase transparency and build trust.
Simplified paperwork: Reg CF streamlines the process of raising capital, reducing the burden of paperwork and legal fees.
Regulation CF also imposes certain requirements on companies seeking to raise money through online capital formation, as well as on the platforms themselves. For example, companies must provide certain information to investors, such as financial statements, and capital raising platforms must take steps to ensure that companies and investors are properly registered and that the companies comply with the law.
Overall, Reg CF provides small businesses and startups with a cost-effective and convenient way to access capital from a large number of investors.
Contact us today for a copy of our Reg CF Fundraising Journey brochure.