Wednesday, May 13, 2015

Crowdlending in Texas--Can my small business get a loan?

What is Crowdlending?

Crowdlening is funding a small business loan by getting many people to lend small amount. These could be customers of the business, neighbors, friends, family or community members. Earning interest on your investment is even more compelling when you are helping people and businesses that are important to you.
Crowdlending became possible in Texas only recently through the implementation of the Texas intrastate crowdfunding exemption.

Who is it suitable for?

There are two things that you need to successfully crowdfund a loan: 1) a cash flow generating business (so you can pay back the loan), and 2) a large network of supporters that you can reach out to. That could be personal or business connections.  Thanks to the new regulations you can now leverage your network to raise growth capital for your business, instead of knocking on closed bank doors.
To crowdfund your loan your company must be registered in Texas.  You also can raise money only from Texas residents.

What does it involve?

If you want to crowdfund in Texas, you need to follow a few rules.

1.     Pick a portal
You have to set up your crowdfunding campaign on a Texas registered crowdfunding portal. There are currently only two registered portals that specialize in debt, and they are quite different: Lendoor and NextSeed.

2.     Povide information
Your crowdfunding campaign must contain certain information about your business and about your loan. While all the regulatory requirements may seem overwhelming, most portals will assist you with preparing your campaign.

3.     Crowdfund

This is by far the most important part of the process. The success of your loan is in your own hands, so be prepared to reach out to everyone you know. If you reach your target amount you will receive your loan. If not, all the pledges will be returned to investors. Remember, it is a loan, not a gift! This makes it more likely to fund.