If you are an entrepreneur, you probably know that funding a startup can be tricky. It can be hard to get people to crowdfund your project, and legal limitations can easily get in your way. Fortunately, with Regulation A+ in effect, fundraising for your business will be easier than ever before.
Below are some common FAQs to help you get started with Regulation A+:
What Is Regulation A+?
Regulation A+, often abbreviated as Reg A+, is a new set of provisions that will implement Title IV of the Jumpstart Our Business Startups Act (JOBS Act) and replace the existing SEC Regulation A.
Is My Business Eligible For Regulation A+?
Firstly, your company must be based in the US or Canada in order to be eligible. According to the U.S. Securities and Exchange Commission, your company is not eligible if it:
My Business Is Eligible - Now Where Do I Fit Into Regulation A+?
Regulation A+ has created two tiers for investing: Tier 1 and Tier 2. Tier 1 allows companies to raise up to $20 million through a small-scale IPO, while Tier 2 allows bigger companies to raise up to $50 million. Each tier has different requirements, so you should check your business’s criteria to determine which tier your business falls in.
Who Is Allowed To Invest Into My Business, And How Much Can They Invest?
Almost anyone can invest towards your business. The new legislation is worded so that “nonaccredited investors,” or anyone with money to spare, can invest up to ten percent of their income or net worth into any Regulation A+ business they choose.
How Is Regulation A+ Different From Regulation A?
The legal implications in the previous Regulation A made it extremely difficult for small businesses to fundraise. Only accredited investors could invest with Regulation A, and companies could only collect a maximum of $5 million. With all these limitations, many businesses didn’t even bother to take advantage of Regulation A provisions. With the newly revised Regulation A+, small businesses will be able to access more investor capital and investors will have more flexibility with investing.
Are There Any Risks When It Comes To Using Regulation A+?
Unfortunately, yes. While Regulation A+ does allow a higher ceiling for fundraising, it also can cause your startup to ultimately lose money. People are often not willing to invest large amounts of money towards private companies for economic and social reasons, so be prepared for small-dollar investors and hire professionals to help you make the most of Regulation A+.
I Have A General Understanding Of Regulation A+ Now. Is It Right For Me?
Like many questions, it depends. Regulation A+ is a relatively new concept, but despite the risks, Regulation A+ may be the most efficient way to fundraise for your business. Keep in mind that there are many other options for fundraising. For some, it may be safest to stick with accredited investors and traditional Regulation D offerings, even though it may be more expensive. For others, crowdfunding websites might be the more ideal option. It’s all up to you and what you think would be the best for your business.
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