South

Looking for ways to fund your startup? Try crowd funding.

Traditionally, small businesses have gone to banks for loans, but that’s always been a tough sell. Banks often feel small business loans are too risky. And unless you’re an established business seeking to raise tens of millions of dollars, the stock market is too big and complicated. Granted, there are special programs like microloans for small business, but all in all, raising money has always been tough for entrepreneurs.

But there’s a new option on the horizon: “crowd funding.” If the term sounds familiar, you’ve probably heard of sites like Kickstarter, RocketHub and Indiegogo. They’ve been in the news recently for charity fundraisers and products people want to see.

Because of a new law called the Jumpstart Our Business Startups (JOBS) Act, funding portals like these and others are now able to offer small businesses something like a small-scale public stock offering: They’ll be able to raise cash directly from consumers in exchange for partial ownership.

Small businesses could soon use crowd-funding sites to raise capital, and small investors could theoretically get in on the ground floor of the next Facebook. Here’s what got it started and how it works…

The JOBS Act

The idea for the bill initially grew out of recommendations from President Obama’s Startup America initiative last year – and was drafted by Republicans in the House of Representatives. It received rare bipartisan support and passed in April.

The law does a lot more than allow crowd funding. It also loosens many business regulations and makes other ways to raise capital easier. The U.S. Securities and Exchange Commission, the part of the federal government responsible for watching over Wall Street and enforcing securities laws, is still trying to figure out how this new fundraising model is going to work and how to protect investors. They’re currently establishing rules. (You can comment on the SEC’s website or read what others are saying.)

It’s not clear what the rules will be or exactly when they’ll become effective, but since the law gives the SEC nine months to develop those rules, it will probably happen early next year. And we do know a few things already, based on the legislation itself

How BBNomics crowd funding works

Right now, our website let creative people looking for capital list projects (ranging from products to music and art) with a financial goal and a time limit. People who want to support these projects can back them by pledging a donation of $1 or more if they choose.

If the project reaches its goal in the set timeframe, it gets funded with all of the money it raised, even if it’s way in excess of the stated goal. If it doesn’t meet the goal, the project gets nothing and the backers keep their money.

To encourage pledges, offer incentives to donate by establishing several reward thresholds for people who chip in.

Those pledging money get no ownership in the business, but those who put up $150 or more will receive one of the first of what ever product or service you are offering.

And this is the big difference between the crowd funding you see today and what’s ahead. Starting next year, the incentive for investors will be equity: Investors will put up money and own a share of the company, just as they do in the stock market today. And businesses can raise up to $1 million a year this way.

It’s an opportunity that until now small business owners could only dream of. It’s not free money –  to be successful at crowd-funding projects spend a lot of time planning and showcasing their ideas, coming up with incentives, and providing regular updates to your backers (don’t worry we will assist with that). In short, crowd funding offer small business another avenue to raise money, but nobody’s saying it will be easy.

To get started, click here.

Don’t forget to support BOB’s this weekend, please take your children with you on this journey; explain to them the importance of supporting one another, gaining financial stability, building unity, community and economic independence. RSVP # FREE Back to School Cash Mob Weekend – Worldwide « August 17 through 19, 2012 all day.

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