Your small business is just starting out and you need a way to get some extra cash flow. You don't want to take out another loan but you'd like some extra inventory, a new employee or maybe one of those neon lights to grab potential customers' attention. A new law makes finding money online much easier, and not just with online banking.
The Jumpstart Our Business Startups Act was signed into law recently, cleaning up disclosure rules and making it easier for small business owners to find investors through crowdfunding.
What's crowdfunding?
That means users can make a one-time cash donation to whatever businesses they want, or they can make several donations over a period of time. In the past, only investors with an annual income more than $200,00 were allowed to be considered investors in a business, but this opens the door to really making your local small business a community enterprise. Lots of small investments can mean a big profit for your business.
According to Rory Eakin of CircleUp, income from crowdfunding will also be a major boon for the U.S. economy. Not only will new investors energize small businesses but the Center for Venture Research projects six jobs will be created for every new investment obtained.
The only limitation here is that you can't sell more than $1 million in shares per year and no single investor can give more than 5 percent of their annual income, unless they make more than a certain amount.
Are there other limits?
You'll want some good financial investment advice, especially because there aren't federal guidelines in place regarding taxing for crowdfunds, and making sure your business is protected for the future is key. Keep track of who has donated to your business as well because you might have to give an account of individual investors at the end of the year. Until tax laws are created specifically for crowdfunding, careful financial planning is the best defense.
Whether you're looking to for traditional or alternative ways to help grow your small business, My Bank is here to support you with top-notch financial services and professional advice, so stop in today and see what we can do for you.