Illinois Intrastate Investment Crowdfunding

On Jan. 1st 2016 the Illinois equity crowdfunding law became effective. In a state with a reputation for being unfriendly to business and overprotective of its citizens, Illinois legislators passed the most aggressive intrastate crowdfunding law in the country. Title III of the Jobs Act which legalized investment crowdfunding limits companies to raising $1mm in a 12 month period and has strict limits on the amounts that both accredited and unaccredited investors can invest. In some cases limiting investors to $2,500 in aggregate (all investments) in a 12 month period. The Illinois crowdfunding law allows companies registered and operating  in Illinois to raise up to $4mm a year. Illinois residents who are unaccredited can invest up to $5,000 per deal while accredited investors have no limit to the amount in which they can fund offering companies.

Although the Illinois law became effective on January 1st, companies and investors have been waiting for the Illinois Secretary of State to release the administrative rules and applications for capital raises to being. The delay does not come without a potential payoff. The Secretary of State will have the ability to update the rules and regulations within the law as they gauge what is needed to allow this new market to flourish. We are excited to announce that we fully expect the rules to be released by April 1st.

As we await these rules we are beginning to find news stories and landing pages for Illinois crowdfunding portals. Portals are the mandatory internet intermediaries that must host any Illinois company looking to raise capital using the crowdfunding exemption (which operated under federal rule 147). So far we have come across many developers offering to create internet portals including crowdforce and crowdfundconnect. We have seen that truCrowd (who also operated an intrastate portal in Texas) say they will be entering the market and VestLo who will be operating a custom created Illinois portal operating out of 1871 (famous Chicago startup co-working space). VestLo will be working with the author of the Illinois crowdfunding law, attorney Anthony Zeoli and Axia Law, one of the leading law firms for Chicago based tech startups.

We are very excited to watch this new fundraising mechanism put to use in Illinois as it will quickly become the most powerful tool in the Invest Local Illinois movement. The law (Illinois HB 3429)is designed to allow and encourage investment in local communities by the customers who frequent the businesses looking to raise capital and grow.

Presentation explaining the Illinois equity crowdfunding law.

Sign-up for more information on Illinois Equity Crowdfunding

TOOLS FOR GRASS ROOTS INVESTORS

Investing locally is a great way to build a strong community.   You live in your particular town, why not invest in it too? By supporting local businesses, you’re not only helping them – you’re helping your community stay strong. As an added bonus, every time you invest in a local business, you’re allowing an entrepreneur realize their dream of owning their own business. It’s a win win for everyone. The only problem is, unless you’re one of the top tier 2% of investors that securities regulators consider accredited, you may be told your investment options are limited. That’s not true. Here are the tools you need to invest local if you’re in the 98% of unaccredited investors.

  1. Invest In Yourself – The best rate of return happens when you invest not only locally but in yourself. Get rid of your credit card debt, buy a home, grow your own food, and generate your own heat and electricity with solar energy.   You are your best local investment.
  1. Create Targeted CDs – Many banks and credit unions are wary of loaning small businesses money without the guarantee of full collateral. To invest local and help out small businesses, you can put your money into a special certificate of deposit that offers full collateral to local businesses. If your bank or credit union currently doesn’t offer this program, ask them to create it.
  1. Pre-purchase Good and Services – This is an approach that works well on crowd funding sites like Indiegogo and kickstarter. The business creates a page and usually a video explaining the product they are trying to create. You decide if you want to support them.   The reward on your investment depends on the level of support you’ve given. By purchasing the goods or services before they’ve been produced, the business raises capital without all the sticky red tape. Type in your town’s name in the search box to find local campaigns to invest in.
  1. Form A Local Investment Club – If you find it difficult to get in to a more established investment fund because you’re an unaccredited investor, form an investment club! Gather community minded individuals together and form a club to pool your assets together. The more funds, the more you can do for your community and local businesses. A new option is participating in equity crowdfunding with a focus on your state or metro area.
  1. Put your money in local banks/credit unions – Forgot using big chain banks. If you are serious about investing local, you need to put all your checking, savings, credit cards, and loans in a local bank or credit union. Credit unions are responsible for 30% of small business loans to companies that may not get a big, chain bank to give them a second look. By moving your assets to a local bank or credit union, you are also showing your support to invest locally.

By investing locally, you’re sending a powerful message to the local, state, and national government. You’re saying ‘I care about Main Street – not Wall Street.’ Make your community special by supporting local businesses.