Have you heard of the Illinois Intrastate Crowdfunding Law? If you’re a small or medium sized business in Illinois, it may be a great opportunity to grow your capital. Recently approved by the House and the Senate unanimously, signed in to law by the governor this is an exciting announcement for entrepreneurs, investors and venture capitalists.
In today’s article we’ll discuss what the Illinois Intrastate Crowdfunding Law is, what the Bill means for SME’s and how you can use it as an opportunity for your business.
What is the Illinois Intrastate Crowdfunding Law?
This Bill essentially allows businesses in Illinois to actively solicit crowdfunded capital from local residents, in exchange for equity in their business. The maximum allowed investment from each investor is $5,000, whilst a company can raise $1 million in a year, with the potential for $4 million if they provide a financial statement for investors.
This differs substantially from popular existing crowdfunding websites like Kickstarter because the capital they raise is no longer from ‘accredited investors’, it can be from anyone who lives in Illinois. Illinois residents also receive debt/equity from the company they invest in, which isn’t usually the case with traditional crowdfunding websites.
What the Law means for SME’s & precautions
If you’re a business owner and you’re looking for investment, this is truly a great opportunity for you. This Bill could give you access to millions of dollars of new capital, growing your business via local residents who are passionate about entrepreneurialism in Illinois.
It is important however to understand that there should be some element of caution with this Bill. Investors may have expectations in terms of influencing how the business is run or returns on their investment. Businesses should also ensure they are complying to the Bill’s legislative requirements before soliciting local residents.
Additionally, if you are soliciting investment from local residents, you may have to disclose certain elements of your businesses’ performance and financial data. If you do this, understand that as you’re approaching local residents they are members are of the general public and therefore your competitors or other key stakeholders may also find out. Subsequently, only disclose information regarding your company that you are comfortable about being public.
How you can use the Law as an opportunity for your business
This may be a better alternative than receiving investment via a huge funding firm because you’re giving ownership to potential customers who can offer insight, feedback and new ideas. They’re passionate about living in the state, they want to see their local area invested in and they can now have a vital role in the growth of Illinois. It’s essentially empowering local residents to make a difference and improve the state of Illinois, whilst investing in a business they love, creating a sense of public spirit.
As you can see, the Bill is a great opportunity for SMEs in Illinois to gain investment from potential customers passionate about developing their local area. If you have any questions about the legislation, please feel free to ask and we’ll be happy to help. Receive a FREE Guide on Illinois Equity Crowdfunding – Here