The November 2020 SEC rule change to crowdfunding offerings now allows businesses, entrepreneurs and real estate developers to directly access the capital markets with arguably the highest potential surety of a successful outcome to obtaining capital financing on a non-recourse basis.
But what does it cost?
The real answer is, of course, whatever it takes because there are some unknowns – such as how much you ultimately raise (and you can raise up to $75 million) and how much advertising and market costs you will have to absorb. Having said, using the laddered structured financing approach, the real cost of at-risk capital for raising these insane levels of capital may be incredibly attractive, with financial investment leverage being greater than 100:1 if everything works out. We use this planning tool to help clients come to grips with what their financial responsibilities might in fact entail.
Of course, pre-offering advertising may result in a funding counter-offer at any time, and that shortcuts the whole process, risks and costs when it works out. If you aren’t taking a serious look at the crowdfunding tool, you are missing the boat and may be left on shore for a long time. Here’s hoping the odds are ever in your favor.