However, there are several problems that fundraisers could run into on their property journey. Running out of funding but not running out of deals, unable to source investors, difficulties with compliance and so on. Encompassing all of these issues is another more serious factor and that is the ability to raise funds legally. So, when faced with all these issues, what’s a fundraiser to do?
Learn the 6 steps of how to raise funding legally of course! Understanding each of these steps, in conjunction with the necessary regulations, is an important factor for success in equity crowdfunding. They could truly help you on your way to successfully (and legally!) raising funds. Whether you’re a property crowdfunding expert or new to the crowdfunding community, these steps could set you on your way to funds in no time.
● An Equity Offer Document – this will be the main document to provide to investors and should include details of the project, the intention for the use of the money and financial projections amongst other things.
● DD Documentation – Every fundraiser will have to supply due diligence documentation including ID docs and proof of address.
● Financial Breakdown – You will need a detailed overview of the financials for the project.
● Project Documentation – Depending on the type of project, a fundraiser may be asked to provide valuations, proof of planning application, proof of rental income/lettings etc. These documents are required to back up material statements made within the Equity Offer Documentation and the Financials.
● They have passed the on-platform Appropriateness Test
● They have completed their KYC/AML checks
● They have confirmed that they will invest less than 10% of their net assets in the relevant investment.
Some of these criteria also apply to High Net Worth and Sophisticated Investors, who have self-designated as such.
Regulated platforms such as LEOcrowdfunding are also required to assess and ensure that ALL clients understand the risks involved with investing – this is emphasised during the online registration process but also included in all promotional material made available to/viewable by any prospective investors, with prominent risk warnings such as, “Capital at risk and returns not guaranteed” or, “Past performance is not indicative of future results”, being used as and when required. However, these rules do not just apply to crowdfunding platforms but to anyone who is seeking to raise finance from multiple investors. Therefore, it is important for Fundraisers to be aware of the regulations regarding marketing, promotions, deal structuring and many other areas. Remember: ignorance is no defence!
If you are interested in learning more about the full extent of the suggested steps for raising funds legally, then get in touch to find out when our next 3-day event is running which will completely cover how successful property developers and landlords raise funds legally? Get in touch with a member of our team for more information or sign up here! Please note, LEOcrowdfunding do not give legal or financial advice.
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