One of the questions that we're frequently asked by small businesses is what they can do right now to prepare to raise money through equity-based crowdfunding. It's an excellent question, and despite the fact that equity-based crowdfunding won't become legal until early 2013, there is still a lot that businesses can do to get ready. Here's our list of the top 5 things business can do right now:
- Create a business plan. Businesses plans can take quite a while to write and polish, but they are going to be an essential component of what investors are going to look at when deciding whether or not to invest in your business. The more thorough the business plan the more confidence investors will have in your business and the more likely you will be to reach your funding goal.
- Financial statements. Like the business plan, certified financial statements will also be essential. There are different requirements depending on how much you intend to raise. If you plan to raise over $100,000 then they will need to be reviewed by an independent accountant. If you plan to raise over $500,000 then you will need to undergo an audit. Obviously this will take some time, so it's something that you can start doing now.
- Decide how much money you want to raise and how much equity that amount is worth. You will have to explain your offering to the investors, so make sure you've thoroughly thought things through and can justify your numbers.
- Write an intended use of the funds. One of the requirements will be for you to explicitly state what you intend to do with the money that you raise. Being able to tell investors exactly what you're going to do with the money will help a lot in building their confidence in your business.
- Compile biographies for all officers and directors. The SEC is going to require you to provide background information on all officers, directors, and shareholders that own more than 20% of your business. Although the exact details of what they'll require is still up in the air, it's a good idea to start compiling the basic biographical information now.
To find out more about how you can start preparing now, simply shoot us an email at info@EquityShack.com.