How the SEC’s Temporary Changes to Regulation Crowdfunding Affect Your Raise
On Monday, May 4th, the SEC made some very exciting changes to equity crowdfunding that give small businesses relief during COVID-19. These changes remove some of the biggest hurdles to raising capital via Regulation Crowdfunding (namely the cost and time required to launch) and radically alter how companies can raise funding from the crowd.
All of these changes are live and are in effect until August 31, 2020. Here’s what’s changed:
What do these changes mean for your raise on StartEngine?
At StartEngine, we want to do our part and help companies during COVID-19, so we are using these new changes to help companies raise much-needed capital more quickly and more easily than ever. We are excited to launch a new program that will allow you to begin raising money in just 3 days!
Let’s take a deeper dive into how these changes work:
Previously, Regulation Crowdfunding offerings required reviewed financials before you could launch your offering. To launch, you had two options:
- Save on upfront costs and self-certify your financials to raise up to $107K. To raise more than that amount, you would need to get an independent review or audit from a CPA and file an amendment to your offering with that review.
- Use one of StartEngine’s low-cost, preferred CPA vendors and get a 2-year independent financial review or audit done in order to raise up to $1.07M from the start.
Regardless of which option companies chose, preparing financial documents could take weeks. Now, you can launch without financials, and this is what unlocks our three-day program.
Without financials, all you need to focus on to launch is your legal documents (such as Articles of Incorporation, cap table, etc) and your campaign page. Both of these can be accomplished in a matter of days!
However, in order to close on the funds you raised without financial statements, you are required to file an amendment to your offering with your financial statements (you only need CEO-certified if your maximum raise is $250,000 or less). At that point, everyone who has previously invested in your business will need to reconfirm their investment.
In Regulation Crowdfunding, you historically were required to have your offering live and accepting investments for 21 days before you were able to disburse the funds you’ve raised.
To provide additional relief to companies struggling with COVID-19, the SEC has removed the 21 day period. This means that if you launch with your financials, then you could disburse funds as soon as the first week of your raise as opposed to waiting an entire 3 weeks before actually receiving any of the funds you’ve raised.
Another important change is that the ceiling has been raised for the amount you can raise with self-certified financials. Previously, the limit was $107,000.
That limit has been increased to $250,000, so you can now raise $250K with self-certified financials. Then if you approach that threshold, you can pay a few thousand dollars to work with one of our CPA vendors to get an independent financial review or audit to increase your limit to the full $1.07M.
All of these changes mean that we can launch your campaign on StartEngine at an unprecedented speed. Start your application today to learn more about raising capital on StartEngine.
If you still have questions about these changes, watch a recording of a live discussion about these changes that we hosted earlier in the week with StartEngine’s VP of Sales Allen Jebsen: