Social Enterprises Benefit From Adjustments to Regulation Crowdfund Limits
Last month, the Securities and Exchange Commission (SEC) made inflation adjustments to Regulation Crowdfund (Reg CF) investment limits and raise limits. A summary of these changes can be found here. These changes affect enterprises raising capital and investors.
Changes for Issuers
For businesses, the limitations on how much capital can be raised in Reg CF offerings are dependent on what kind of financial statements the business has prepared. Businesses with financial statements that have been certified by its chief executive officer can now raise up to $124,000 (up from $107,000). Companies that have financial statements that are reviewed by an independent accountant may raise up to $618,000 (up from $535,000) or up to $1,235,000 (up from $1,070,000) if it is the company’s first Reg CF raise. If a company has audited financials, it may raise up to $5,000,000 (this limit is unchanged).
Changes for Nonaccredited Investors
Investors are either considered accredited (high net worth or high income) or nonaccredited depending income or net worth standards. Reg CF limits how much nonaccredited investors can invest based on the investors’ income or net worth. These limits were also adjusted by the SEC. Currently, a nonaccredited investor may invest $2500 or 5% of their annual income or net worth if their annual income or net worth is less than $124,000 (up from $107,000). A nonaccredited investor, whose annual income and net worth are at least $124,000 (up from $107,000), may invest the greater of 10% of their annual income or net worth up to $124,000 (up from $107,000).
Impact of These Changes on Social Enterprises
Our clients are all social enterprises of one type or another. For these types of businesses, the changes described above allow more money to be raised without spending more money on preparing financial statements. Additionally, many social enterprises rely significantly on investments made by their community, which often includes many nonaccredited investors. These community investors can now invest more into enterprises that match their values.
Reg CF Client Offerings
See how some of our current clients are utilizing Reg CF:
Cubo Beverages is offering up an alternative and sustainable pod-based juice machine that can deliver restaurant-quality smoothies, coffee, tea, juices and wellness drinks with all natural ingredients in under two minutes.
Freakin Fitness is raising capital to fill the gap between large-chain traditional gyms and small community-based functional fitness centers.
Dishquo has developed a meal planning nutrition app that offers customized meal plans, automated grocery lists, 3000+ healthy recipes, health and wellness tools and more.
The Karisha Community Center for Wellness in Austin, Texas is a whole person healthcare community center designed to address healthcare inequities and disparities reinforced by the current model of medical care by shifting from sick care to whole person collaborative care.
Momentors is a software platform developed to provide the right expert information at the right moment. In three simple steps, individuals can get solutions to real-world problems from verified experts.
Is your business considering a Regulation Crowdfund raise? Are you looking for a way to include your network in your capital raise? We are here to help. Schedule a free consultation.