Term Notes

  • What is a term note?

    On NextSeed, you can invest in a term note. Term notes have a specified interest rate over a set period of time and are issued under the applicable note purchase agreement. The business will make fixed monthly payments during the term of the note, and will pay the unpaid balance (including any accrued interest) to the investor on the maturity date.

  • What is a note purchase agreement?

    A note purchase agreement on NextSeed is a legal agreement between the investors and a business governing the term notes purchased by the investors from the business.

  • What does the Interest Rate mean for term notes?

    The "Interest Rate" refers to the annualized interest rate applied to the balance of the principal of the investment each month. The term notes are amortized on a monthly basis, and the business pays fixed monthly payments of interest - based on the "Interest Rate" - and principal over the entire term of the investment. This is similar to a standard mortgage. The Total Payment Calculator on the offering page provides an example of how this works. Check out our term loan walkthrough for an example, or, check a standard mortgage calculator online to better understand the concept.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How are payments made for term notes?

    The business pays fixed monthly payments of interest and principal over the entire term of the investment. The term notes are amortized on a monthly basis, similar to a standard mortgage. The Total Payment Calculator on the offering page provides an example of how this works.

    Check out our term loan walkthrough for an example, or, check a standard mortgage calculator online to better understand the concept.

Revenue Sharing Notes

  • What is a revenue sharing note?

    Revenue-based financing, sometimes referred to as royalty investing or advance revenue purchases, has long been a common financing format in oil and gas development, film production, biotech/pharmaceutical development and numerous other industries.

    On NextSeed, you can invest in a revenue sharing note. Instead of requiring a business to pay a fixed amount each month over a certain period of time (as typically required under a term note), a revenue sharing note on NextSeed requires a business to pay a fixed percentage of its monthly gross revenues until a predetermined total amount has been paid (the “Total Payment Amount”).

    Check out our revenue sharing walkthrough for an example.

  • How are payments made for revenue sharing notes?

    For revenue sharing notes, businesses expect to make monthly payments to investors. Payments to investors will correspond to their proportionate shares of the business’s top-line gross revenues from the previous month. If the business has not generated revenues (for instance, it is not yet open), then no payment is due. The exact length of time that it will take a business to pay all of its revenue sharing obligations cannot be known in advance since the business's revenues may vary during the payment period.

    Monthly payments will continue until the business has paid investors in full pursuant to the terms of the applicable note purchase agreement.

    If any balance remains outstanding on the maturity date, the business will be required to promptly pay the entire outstanding balance to investors.

    For an example of a breakdown of revenue sharing payments, check out our Revenue Sharing Walkthrough.

  • What is the “Total Payment Amount”?

    The Total Payment Amount is the total amount of money a business agrees to pay investors under the aggregate revenue sharing notes issued during the offering. The Total Payment Amount is your principal investment, plus a return on your investment. It is calculated by multiplying your principal investment amount by the investment multiple. For instance, if you invested $1,000 and the investment multiple is 1.5x, then your Total Payment Amount is $1,500.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What is an “Investment Multiple”?

    The Investment Multiple is used to calculate the Total Payment Amount. For example, if the Investment Multiple is 1.5x, and your investment is $1,500, under the contract the Total Payment Amount is $1,500, payable over the term of the note.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What is the “Revenue Sharing Percentage”?

    The Revenue Sharing Percentage is the percentage of the business's gross revenue that it agrees pay to investors on a monthly basis until it has paid you your Total Payment Amount. It is not in addition to your Total Payment Amount. For instance, if your Total Payment Amount is $1,500, the business will share a percentage of its monthly revenues with you until it pays you a total of $1,500.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What makes a revenue sharing note unique?

    A revenue sharing note on NextSeed is unique because it provides entrepreneurs with capital in exchange for a percentage of future revenues to their investors. Investors are technically purchasing a note – a debt security – but investors can also participate in some of the potential upside of a business they have invested in. The more investors help the business by purchasing their products and services or spreading the word as brand advocates, the more revenue the business will generate and the faster the business will be able to pay its investors. Investors benefit because a shorter payment period increases the investors' rate of return. The flexible payment structure of revenue sharing is directly influenced by the success of the business and helps align the economic interests of the business and its investors.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How is a revenue sharing note structured?

    The terms of revenue sharing notes on NextSeed are documented through a note purchase agreement between a business and its investors. Under the note purchase agreement, an investor agrees to purchase a revenue sharing note issued by the business in exchange for the business paying a fixed percentage of its gross revenue on a monthly basis until the investor has been paid a predetermined total amount (the “Total Payment Amount”). If the Total Payment Amount has not been paid in full by the maturity date, the business is required to promptly pay the entire remaining balance.

    Note that the Total Payment Amount is the maximum amount a business agrees to pay investors. The revenue sharing is not in addition to the Total Payment Amount - the revenue sharing determines how much a business pays each month in order to get to the Total Payment Amount. The investment ends if and when an investor receives their Total Payment Amount, even if it is before the maturity date.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How is a revenue sharing note different from a traditional term note?

    A term note typically carries a fixed interest rate and a monthly repayment schedule with a set maturity date. A business that has issued term notes is required to make fixed monthly payments to its investors irrespective of its operational performance.

    In contrast, a revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until it pays a predetermined total amount (the “Total Payment Amount”).

  • What is the Payment Automation Service?

    Each business that issues revenue sharing notes is required to participate in the Payment Automation Service, which enables NextSeed to monitor the business’s revenue on an ongoing basis. Each business will provide NextSeed with passive access to the business’s bank accounts or their automated point-of-sale reports for purposes of revenue verification and monthly payment calculation. NextSeed will not have the ability to take any unauthorized actions in relation to any business’s bank accounts.

Investment Return Calculations

  • How does NextSeed calculate investment returns?

    NextSeed strives to provide a fair and reasonable measure of investors’ current investment performance, updated on a monthly basis in conjunction with the latest cash payments made by businesses. For this purpose, we are utilizing the concept of Net Annualized Return (“NAR”) to measure the current financial return on each investment in your portfolio. Generally speaking, with respect to a particular investment, NAR is an annualized measure of the rate of return on the principal invested over the life of such investment, calculated based on actual cash payments received each month, net of service fees, actual write-offs and actual recoveries. NAR is not a forward-looking projection of the performance of any investment, and reflects the full principal value of such investment until and unless such investment is written off.

    On NextSeed, we currently offer two types of investment products (a term loan and a revenue sharing loan), and NAR for each investment product is calculated differently to better reflect its underlying characteristics. Additional explanations for NAR calculations are described below.

    In addition, we have adopted the concept of Total Net Annualized Return (“TNAR”) to approximate the overall financial return on your investment portfolio, regardless of what type of investment you have made on NextSeed. TNAR is a weighted average of NARs on all current investments in your portfolio based on the formula described below.

    With respect to a particular investment, NAR is first calculated when an investor begins to receive payments from the underlying business (usually after the first full month following the closing date, or following the initial startup period, as applicable). Until that time, NAR will display as "New" and no calculation will be available, and only the investments that have NAR will be considered in your TNAR calculation.

  • How does NextSeed calculate NAR for a revenue sharing note?

    NAR for a revenue sharing note is an IRR calculation using the following formula, which is applied to all cash flows received by an investor starting on (i) the closing date of the applicable note purchase agreement (such closing date indicated as date “d0”) until (ii) the final month when the total required payment under the applicable note purchase agreement is paid by the business to the investor (such final monthly period indicated as the Mth month, and the final payment date indicated as dM):

    Revenue Sharing Loan NAR Formula

    This formula is applicable to any monthly period ending while a particular revenue sharing note is outstanding, where "i" refers to the monthly period and where:

    • d0 = closing date of the loan
    • di = actual date of the “i” monthly period on which the investor received a cash payment
    • dN = most recent date on which the investor received a cash flow
    • dM = date of expected final payment when the loan is fully repaid in the Mth month, assuming continuous payment of the rolling average of monthly payments to date
    • (Note: For purposes of determining inputs to utilize in this formula, we have adopted Microsoft Excel’s convention to store dates in sequential serial numbers for computation)

    Furthermore, with respect to an investor:

    • Cash Flow0 = the amount of the investor’s initial investment on the applicable closing date
    • Cash Flowi = the amount of the net cash payment received by the investor for any “i” monthly period (e.g., with respect to a particular note, the sum of Paymenti + Late Feesi – Service Feesi – Write Offsi received by the investor)

    In addition, as of any “i” monthly period, for purposes of calculating the hypothetical Cash Flowi for future monthly periods (i.e., (N+1) ≤ i ≤ M) in order to determine overall NAR, we assume that the average Cash Flow i for all past monthly periods (i.e., 1≤ i ≤ N) will be made continuously until the total required payment under the applicable loan is paid by the business to the investor. This assumption is reflected by the below formulas:

    ,

    In the context of a revenue sharing note, the applicable NAR calculation is designed to reflect the flexible nature of a revenue sharing arrangement, in which (1) the total payment required to be made by a business to its investors is fixed, (2) the revenue sharing percentage used to determine the amount of monthly payment is fixed, and (3) the amount of time it ultimately takes to pay off the total required payment will vary depending on the actual revenues of a business. This NAR calculation seeks to capture a reasonable snapshot of the current rate of return of such note, assuming that cash flows received by the investor to date are reasonable proxies for estimating future cash flows expected by the investor until the total required payment under the applicable note purchase agreement is paid by the business. Based on the cumulative amount of cash flow received for a particular month, we calculate NAR for the relevant calculation period as if the remainder of such total required payment is paid off based on the rolling averages of monthly cash payments to date. NAR is not applicable for any investment during the period in which the underlying business is not required to make any payments in accordance with the terms of the applicable note purchase agreement (including during the Startup Period).

  • How does NextSeed calculate NAR for a term note?

    NAR for a term note is calculated using the following formula, which is applied to each monthly period ending during the term of a term note from the 1st full month following the closing date to the final and Nth month of such term:

    This formula is applicable to any monthly period during the term of a particular note, where the "i" refers to such monthly period. If during any monthly period no payments are received by the investors, then the interest and late fees received (if any) and service fee paid, in such monthly period will be zero. If a particular note is written off, we subtract the entire outstanding principal amount of the note from the numerator. But if a portion of such written off note is later recovered, we add back the amount recovered net of applicable fees. Once the net payment amount is determined for a particular monthly period, we divide such amount by the outstanding principal as of that monthly period. This calculation yields a fraction for the monthly period.

    This calculation is performed for each monthly period, taking into account all interest received, late fees received, service fees paid, and all charge offs and recoveries made relative to the principal outstanding in such monthly period. We then annualized the result of the calculation by taking the sum of (1 + the dollar-weighted average performance for all monthly periods), raising it to the 12th power, and subtracting 1. This calculation results in NAR for a term note, which is expressed as a percentage.

  • How can investors estimate the implied return of a revenue sharing note?

    A revenue sharing note on NextSeed requires the business to make monthly payments equal to a fixed percentage of its monthly gross revenue until cumulatively the total amount paid to investors has reached the promised investment multiple by the business either before or by the note’s maturity. As a result, the payment received by investors could vary month to month, subject to changes in the monthly gross revenues of the business. Because of this variance in monthly payments, a standard simple interest rate calculation (such a mortgage calculator) does not appropriately measure investors’ expected return underlying the revenue sharing note.

    Given the expected varying cash flows coming to them under a revenue sharing note, investors could evaluate the expected investment performance using the concept of Internal Rate of Return (“IRR”). IRR is a popular methodology commonly used by corporations and investment professionals to measure the profitability of potential investments. Investors can calculate the expected IRR of a revenue sharing note using the estimated monthly cash flow derived from their own assumptions and assessment of the financial projection provided by the business.

    References to the IRR methodology (and the academic explanation) and the different ways to calculate IRR can be found from public sources such as Wikipedia and Investopedia.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How does NextSeed calculate portfolio TNAR?

    TNAR for an investor’s portfolio is calculated using the formula below, where “i” refers to the number of investments made sequentially in an investor’s portfolio and “N” refers to the latest and Nth investment made by such investor.

    Portfolio TNAR does not include NAR calculations for investments that are not yet required to begin payments under their applicable note purchase agreement (including during the Startup Period).

  • What are the limits of NAR and TNAR return calculations?

    The NAR and TNAR calculations described above represent only one of many different ways to calculate and measure the return on cash invested. There are other methods for evaluating the historical and potential investment returns on fixed-income securities and other investments that you may prefer to use to assess the performance of your investments. As NextSeed is unable to provide any other measure of investment returns other than as described above, you should consult your financial advisors if you have any questions about measuring your investment returns.

Investor Qualification

  • Who can invest on NextSeed?

    Anyone over the age of 18 with a U.S. social security number or tax identification number and U.S. residential address can make investments on NextSeed. This is because you’ll need to open an investment account at our partner U.S. bank to make investments and receive any payments from businesses.

  • Can I invest if I am under 18 years old?

    Thank you for your interest! It’s great that you’re already thinking about your financial future. Unfortunately, our members must be 18 years or older to be able to invest. Please come back when you’re older!

  • If I don’t live in the U.S., can I invest on NextSeed?

    At this time, only people who live in the U.S. can make investments on NextSeed. This is because investors need to open an investment account with our partner U.S. bank in order to receive any business payments, which requires a U.S. address and social security number. However, our partner bank is looking for a solution to accommodate people outside of the U.S. If you would like to be notified when we are able to accept you as an investor, please send us a note at info@nextseed.com.

  • Do I need to be an “Accredited Investor” to invest on NextSeed?

    No, you don’t. Anyone that is a U.S. resident can invest on NextSeed. Investment opportunities that were only for the wealthy are now available to you!

  • Can entity investors invest?

    Yes, an entity investor can make an investment on NextSeed, just like individual investors.

  • Can I invest through an Individual Retirement Account on NextSeed?

    Yes, you can! Investing on NextSeed is available for Individual Retirement Accounts. Please see our FAQ for IRA Investors for more information.

Investment Guidelines

  • Am I investing in NextSeed or in the small businesses directly?

    On NextSeed, you can make debt investments in small businesses directly. NextSeed is a Funding Portal registered with the SEC and FINRA that allows small businesses to showcase the investment opportunities on the NextSeed site.

  • Is there a limit to how much I can invest?

    Yes, Regulation Crowdfunding places limitations on the total amount investors may make Regulation Crowdfunding offerings within a 12-month period, depending on your income and net worth. NextSeed helps you keep track of your maximum limit on your account center. See the SEC's Investor Bulletin for the latest information. To summarize:

    • If your (including your spouse’s) annual income or net worth (calculated in accordance with Section 230.501 of the Securities Act is less than $107,000, you may invest the greater of (i) $2,200 or (ii) lesser of 5% of your annual income or net worth
    • If your annual income and net worth is greater than $107,000, you may invest the lesser of (i) 10% of your annual income or (ii) 10% of your net worth
    • Your total investments in Section 4(a)(6) crowdfunding offerings cannot exceed $107,000 per each 12-month period.
    • The 12-month period is a rolling period starting from the date of your first investment. Note that the date of your first investment is when an offering officially closes, not when you commit to the investment.

  • Where can I find out more about Regulation Crowdfunding investing?

    To find out more about Regulation Crowdfunding, see our welcome kit! Having trouble accessing the link? Please contact info@nextseed.com to request a copy.

  • If I don’t get equity, how is this an investment?

    Contrary to popular belief, equity is only one kind of investment. There are actually three main types of investments - equity, debt and cash equivalents. On NextSeed, you are making debt investments. It's like buying bonds instead of stocks.

    Debt investors typically receive regular cash payments tied to an interest rate or total return. The payment terms would be specified in the investment contract. On the other hand, equity investors in a private company typically need the company to go public or get acquired before they receive any payment. Due in part to this difference, equity investments are generally considered to be riskier than debt investments.

  • Are there any fees for investors to sign up or invest?

    There are no fees to open an individual or entity NextSeed Account or to make an investment on NextSeed. There are certain fees associated with opening a NextSeed IRA, as explained below. NextSeed will deduct a 1% service fee of each payment you receive to cover transaction and administrative costs. These fees are tracked in your account center.

  • What kinds of investments are on NextSeed?

    All NextSeed investments are Title III Regulation Crowdfunding investments. This means anyone can invest. Businesses on NextSeed currently offer debt investments, which means they expect to make monthly payments back to investors until the investors receive their principal plus the promised return. All debt investments have a maturity date, meaning businesses need to pay you in full by a certain date.

  • Is there a minimum or maximum investment?

    The minimum investment amount is $100. Your maximum investment amount across all Regulation Crowdfunding offerings is based on your income and net worth. Investments are accepted in $100 increments within this range.

  • Will I receive any equity interests or any voting or management rights with my investment?

    No, you will not receive any voting or management rights in a business from your investments on NextSeed.

NextSeed Account

  • I’m ready to sign up. How can I sign up?

    That’s great! There are two ways to sign up. First, you can click “Sign Up” at the top right corner of this page and start signing up via Facebook or email. Or, when you are browsing the offerings and you find one you like, clicking “Invest Now” will start the signup process.

    If you want to sign up by creating an IRA or with your investment entity, you can access those options by clicking “Sign Up” and selecting your preferred account type. You can get more information about IRAs here.

    Please note that if you are signing up using your investment entity, funding your NextSeed account may take a few days or a few weeks depending on how you fund your account – if the deal you are interested in might fill up or close before then, you may want to consider investing through a regular individual account, which allows you to invest immediately.

  • Does the uninvested cash in my NextSeed account earn interest?

    The interest rate applied to the uninvested cash in a regular NextSeed account is posted here. The rate for your NextSeed Account is the same as the rate for "Investor Checking Accounts" with $100,000 in deposit. Our partner bank, GoldStar Trust Company, sets the interest rate based on the Federal Fund Target Rate and the interest rates of peer banks, which is the standard process among banks. Note that the interest rate may change at any time, depending on our partner bank's policy and our ongoing relationship with GoldStar.

    Note that the interest rate applied to IRA's are slightly different. GoldStar charges a monthly record keeping fee on the uninvested cash equal to .000833 or 1.00% per annum. If and when the interest rate earned on the uninvested cash in a given month is below 1.15%, .15% will be paid on the uninvested cash and the difference will be retained as the record keeping fee.

  • What am I creating when I sign up?

    When you complete the signup process, you will create your NextSeed account – an FDIC insured bank account with our partner bank, Happy State Bank DBA GoldStar Trust Company (“GoldStar”).

    Using this account, you can make investments in businesses you like. If there aren’t enough funds in your investment account, you will be prompted to automatically transfer funds from your external account to fulfill the investment. Transfers into your NextSeed account will show up on your bank account under “GoldStar Trust”. If and when your investments start paying returns, payments will be made into your NextSeed account. You can easily transfer funds in and out of your NextSeed account.

    All information about your account will be available on your investor dashboard once you log in.  For more information, see the FAQs for Navigating Your NextSeed Account.

  • Why do I need a NextSeed account to invest?

    Our partner bank, GoldStar, handles all investments, escrow processes, disbursements from businesses, and payments to you. For GoldStar to process all these processes smoothly, NextSeed members open and maintain a NextSeed account.

  • Why do I need to provide my banking information?

    Our partner bank requires your external bank account be connected to your NextSeed account for deposit and withdrawal purposes. Otherwise, it would be difficult for you to deposit and withdraw your funds. The information you provide on NextSeed is encrypted and protected with bank-level security.

  • Why do I need to provide my social security number to invest?

    Your social security number is required by our partner bank, GoldStar, to verify your identity and open your NextSeed investment account. This is the same process you would go through to open any bank account or investment account. The information you provide on NextSeed is encrypted and protected with bank-level security.

  • How do I know my personal information is secure?

    Privacy and protection of your data is paramount for us.  We follow industry best practices, such as multiple levels of bank grade encryption, strict access control and audit monitoring of all customer data.  Also, we use proactive site monitoring and web application firewalls along with many other precautions to help secure your data.

  • Why can’t I use Paypal or debit cards to fund my account?

    At this time, our partner bank GoldStar only supports deposits and withdrawals from bank accounts only. In addition, GoldStar is able to provide NextSeed accounts at a low cost because of the current cost-effective process. Allowing Paypal or debit cards would require GoldStar to pass on the cost of using such services to investors, making it more expensive for you.

Navigating Your Investor Dashboard

  • What is in my NextSeed Account center?

    Your NextSeed Account center is where you can keep track of all your investments, interest payments, business payments, net annualized return, transfers and withdrawals. You can access your investment contracts, NextSeed membership agreements, your 1099 tax statements and education materials. You can also update your contact information, email, password, bank account and investment limits.

  • How do I track the status of my investments?

    You can keep track of your investments in your NextSeed Account Center. In your Account Center under “My Portfolio”, you can see which deals you’ve invested in, which have successfully closed, and payments you’ve received from each business. You can also see your Net Annualized Return on each investment.

  • How can I deposit or withdraw my funds from my NextSeed account?

    You can deposit or withdraw funds by clicking "Transfer Funds" on the left hand menu of your Account Center. Select "add funds" or "withdraw funds" from the drop-down menu.

    If you initiate a deposit, the funds need to arrive in your NextSeed account before you can withdraw them. A deposit can take up to 5-7 business days to clear, and we will notify you as soon as the funds are available.

  • How do I update my investment limits?

    You can update your income, net worth and other non-NextSeed Regulation Crowdfunding investment information by going to “Investment Limits” in “Settings”.

  • How do I calculate my income?

    You can use your individual income information, or your joint income with your spouse (note that if you do this, your spouse cannot also use the same income information for their account). You can include ancillary sources of income, including from side jobs, rental income and capital gains.

  • How do I calculate my other, non-NextSeed Regulation Crowdfunding investments made in the immediate past 12 months?

    Regulation Crowdfunding investments are a specific type of investment that you can only make on Funding Portals like NextSeed.  Public stock and bond investments and any investment on investment platforms that are not Regulation Crowdfunding investments are not to be included (for instance, eREITs are not Regulation Crowdfunding investments).

    NextSeed will help you keep track of any Regulation Crowdfunding investments you make on our site and adjust your investment limit accordingly.

  • How do I calculate my net worth?

    Your net worth is calculated by subtracting your liabilities from your assets, excluding your primary residence. See the SEC's Investor Bulletin for the latest information.

  • How do I change my bank account information?

    You can change your bank account information by going to “External Account” in “Settings”.

  • How do I update my address?

    You can update your address by going to “Contact Info” in “Settings”.

  • How do I update my email address?

    You can update your email address by going to “General” in “Settings”.

  • How do I change my password?

    You can change your password by going to “General” in “Settings”.

  • How can I delete my account?

    You can delete your account by clicking “Close Account” at the bottom of the "General" tab in “Settings”.

  • Where can I find my investment documents?

    You can access your investment contracts with each business by going to “My Portfolio” under “Account” and looking under “Active Investments.” Click on the arrow to expand the business you’re looking for and you can access the investment agreement.

  • Where can I find my tax forms?

    You can find your annual 1099 tax forms by going to “Forms” under “Account”. Tax forms are generally available in the first quarter of the year following the first year you deposit funds in your NextSeed account. We will notify you via email when they are available every year.

Choosing Investments

  • Does NextSeed make investment recommendations?

    No. NextSeed is a funding portal registered with the SEC and FINRA. At this time, NextSeed is neither a broker-dealer nor an investment adviser, and does not make any investment recommendations. You are encouraged to carefully consider all elements of an offering and consult with your advisors before making any investment decision.

  • If I have questions for a business owner before I invest, how can I get them answered?

    You can comment and ask questions in the Comments section of each offering page during the offering period. All information regarding the investment is located on the offering page to ensure all investors receive the same information – this promotes transparency.

  • What sort of information can investors review prior to investing in a business?

    Information regarding the business's operating history, finances, management and ownership, and disclosures of material risk factors are made available to investors in the disclosure statement under the "Legal" tab of the business’s offering page. You should carefully review all information that is made available to you and understand the risk factors associated with the business and its industry before making an investment decision.

  • Are investments secured?

    Each investment is different. You can check what type of security interest the business has provided under the “Key Terms” section on the offering page.

  • What does it mean if an investment is secured by a blanket lien on the business?

    If an investment is secured by a blanket lien, it means that NextSeed, as agent for the investors, will obtain a lien on all assets of the business if the offering is successful. The lien does not include any personal assets of the key persons of the business, unless otherwise noted. If there are any present or anticipated senior secured obligations (like a bank loan), such obligations will be disclosed in the disclosure statement.

    In the event a business defaults, NextSeed, on behalf of the investors, will hire a third-party debt collection agency. The debt collection agency, based on their experience in negotiating and enforcing liens, will take commercially reasonable efforts to obtain payment on your behalf. NextSeed will notify you of any progress along the way.

  • What is a personal guarantee?

    A personal guarantee is an individual’s legal undertaking to personally assume any remaining liability of the relevant NextSeed loan received by a business entity, should the business default. For NextSeed offerings, a business owner may sometimes elect to provide a guarantee to further substantiate and represent his/her personal commitment to the success of the business. In order to provide a guarantee, the guarantor provides to NextSeed a self-certified personal financial statement which provides an overview of his/her current state of personal finances prior to the launch of their offering, which on its face indicates a greater value than the aggregate amount of potential financial obligation under their NextSeed loan. NextSeed does not independently verify the accuracy of the value of personal assets presented and certified by a guarantor in the personal financial statement, and each business owner has the sole discretion whether to provide a guarantee.

    Note that a personal guarantee is simply a general personal obligation and not tied to a specific asset (such as the guarantor's home). The existence of a personal guarantee is also not an absolute guarantee of an investment return (e.g., such as guaranteed insurance contracts), and will be subject to applicable laws and regulations if/when presented for enforcement. The current state of finances certified by a guarantor is not necessarily indicative of his/her future financial state, and there is no guarantee that the guarantor will be in a position to assume the remaining liability in the event the business becomes insolvent in the future (e.g., if the guarantor also becomes personally bankrupt).

  • What can investors expect to receive when they invest through term notes on NextSeed?

    Each offering of term notes on NextSeed indicates an annualized return (the “Interest Rate”), which is what investors can expect to be paid in addition to their principal before fees are deducted. For example, if the interest rate is 12%, that means investors can expect to be paid an annualized 12% interest on their outstanding principal investment before fees are deducted. Payments are amortized on a monthly basis, similar to mortgage payments and car loans. For an example of how payments work for term notes, visit our Term Loan Walkthrough.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What can investors expect to receive when they invest through revenue sharing notes on NextSeed?

    Each offering of revenue sharing notes on NextSeed has a fixed investment multiple, which determines the Total Payment Amount to investors before fees are deducted. For example, if the investment multiple is 1.20, that means investors can expect to be paid 1.20x their original investments before fees are deducted. For an example of how payments work for revenue sharing notes, visit our Revenue Sharing Note Walkthrough.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • What are the differences between term notes and revenue sharing notes on NextSeed?

    A term note is structured like your car payment or mortgage – businesses are required to make fixed monthly payments. The stated interest rate indicates the annualized return a business has agreed to pay for your investment.

    On the other hand, because a revenue sharing note provides payment flexibility to a business based on its performance, payments made to investors will also vary. If the business performs better than expected, the investors will be paid in a shorter period of time. If the business performs worse than expected, the investors will be paid over a longer period of time. In each case, the cumulative payment amount is fixed, however, the rate of return on investment can fluctuate. As a result, a revenue sharing note could potentially provide a rate of return similar to an equity investment. The tradeoff is that a revenue sharing note investor forgoes the predictability of fixed payments that are available in a term note investment.

Investment Process

  • How does the investment process work on NextSeed?

    You can browse offerings and sign up to ask questions in the Comments channel. If you are not yet signed up, before investing, you'll spend about 5 minutes setting up your NextSeed investment account and be able to invest immediately.

    Please note: If you sign up with an IRA or investment entity, you will not be able to make an investment until the funds are transferred to your NextSeed account. You will need to come back after the initial setup is completed to make your investment.

    When you decide to invest, you'll e-sign a contract with the business you're investing in. Funds will be taken from the available cash in your NextSeed account and applied to your investment. If you do not have sufficient funds in your NextSeed account, funds will be transferred from your external account to your NextSeed account and committed to that investment. If you change your mind, you can cancel your investment until the last 48 hours of the offering period.

    Your investments will be held in an escrow account by our partner bank (GoldStar Trust Company) until the end of the offering period. Your funds continue to earn interest before the offering closes. If the business successfully meets its funding goal, it will receive the investments being held in escrow. If the business fails to meet its goal, your investment will be returned promptly to your NextSeed investment account.

    Monthly payments from the business will be made directly to your NextSeed investment account. A 1% service fee will be deducted from payments before they are deposited in your account.

  • Why can’t I invest more than $2,200?

    Everyone can invest $2,200 in all Regulation Crowdfunding offerings in a 12-month period. If you wish to invest more than $2,200, please update your income and net worth information, as well as any non-NextSeed Reg CF investment information, to calculate your maximum investment limit. You can update your investment limit information in your NextSeed account center by going to “Investment Limits” under “Settings”.

  • I haven’t hit my investment limit, but I can’t invest as much as I want in a deal. What’s going on?

    You might be hitting the deal’s maximum goal for investments. Please check the “Key Terms” section on the offering page for the maximum amount the business is accepting. Businesses will not accept additional investments above their maximum goal.

  • Ok, I think I’ve made my investment, how do I know my investment is complete?

    Congratulations! If you have completed your investment, you should expect an email from us confirming your investment commitment. Please email support@nextseed.com if you don’t see it! Then, you will receive another email after the end of the offering deadline whether or not the offering has successfully funded within the offering deadline. Finally, if the offering is successful and once all investment funds have been fully processed within 1-7 business days after the offering deadline, you will receive a final email with all your investment details.

    If an offering isn’t successful, you will receive an email alerting you that your funds are being returned to your NextSeed account and when you should expect the funds.

  • Where do the funds for my investment come from?

    Funds for your investment are taken out of your NextSeed investment account. If there are insufficient funds in your NextSeed account, you will be prompted to authorize a transfer from your external account for the difference.

    Note that if a business makes payments into your NextSeed account, those funds will be available to be applied to future investments. For instance, if a business has paid you $30, you now have $30 in available funds in your NextSeed account. If you then make a $100 investment in a new deal, the $30 of available funds will be applied first, and you will be prompted to approve an additional $70 transfer from your external bank account.

  • How can I cancel my investment commitment?

    If you’ve made an investment commitment, you may cancel anytime during the offering period until the last 48 hours of the offering period (the “Lock-in Period”). You may not cancel your investment during the Lock-in Period.

    You can cancel your investment commitment by logging in to your account, clicking on "My Portfolio" and clicking “Cancel” next to the relevant investment during the Offering Period until the Lock-in Period.

  • Can I increase or decrease the amount of my investment commitment?

    If you would like to increase the amount of your investment commitment, you may make a new investment commitment at any time during the offering period. You will not be able to tack on an additional investment – instead, you will need to make a new investment for the total higher amount.

    If you would like to decrease the amount of your existing investment commitment, you may do so at any time during the offering period, except during the Lock-in Period. Your existing investment will be automatically cancelled and a new investment will be made for your new total desired investment amount.

    You can change your investment by clicking on “Change” on the offering page of a deal you’ve already invested in.

    If you qualified for an Early Bird reward, you will keep your place in line so long as your new investment amount still qualifies for the Early Bird reward.

  • What happens if an offering doesn’t meet its minimum funding goal by the end of the offering period?

    If an offering doesn't meet its minimum funding goal by the end of the offering period, no securities will be sold in the offering and your funds will be returned to your NextSeed account.

  • What happens when an offering successfully meets its minimum funding goal?

    The business will be notified when it meets its minimum funding goal. If the business also has a maximum funding goal, it can continue to accept investments until it meets its maximum funding goal (at which point it will be notified and no more investments will be accepted).

    After the business signs all documents necessary to close the offering and funds are disbursed to the business, you will receive your investment documents and the business will receive its funds.

  • What happens if the minimum or maximum target offering amount is reached before the end of the offering period?

    If the minimum target offering amount is reached before the end of the offering period, the issuer has the option to close the offering at an earlier date, but no earlier than 21 days after the offering launched. If the issuer chooses to close on an earlier date, investors will be given at least 5 business days’ notice. You will still be able to cancel your investment commitments until 48 hours before the end of the shortened offering period.

  • Why were my funds returned before the end of the offering period?

    Businesses may choose to withdraw their offering prior to the end of the offering. Or, businesses may choose to change certain aspects of their offering – if material changes are made to the offering, then investors will receive an opportunity to review the changes and reconsider their investment. Investors will automatically receive their investments back and will need to make a new investment to participate in the updated deal.

Monthly Payments

  • When do monthly payments start?

    For term notes, payments start after the first full calendar month after closing (for instance, if a business successfully closes its offering on January 3, 2017, the first payment is due March 2017).

    For revenue sharing notes, payments start the month after a business begins generating revenues. Usually businesses begin receiving revenues after they’ve opened to the public. If a business does not have revenues, then no payments are due.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • Where do I receive my monthly payments?

    Monthly payments, if any, are made into your NextSeed account. They remain there as available cash until you withdraw it or reinvest. If you make a new investment, the available cash in your NextSeed Account will be applied first, and you will be prompted to authorize a transfer of funds from your external account to make up the difference for your new investment.

  • When will I receive my monthly payments?

    Monthly payment processing initiates at the beginning of the month. We will send you an email notification when payments begin processing. Payments will hit your NextSeed account towards the middle/end of the month, and may arrive at different times each month depending on banking holidays and transfer times. We will send you an email notification when your payment is in your NextSeed account, at which time you can withdraw it or re-invest it.

  • How are monthly payments determined?

    For term notes, payments to investors are fixed according to their principal investment amount and the stated interest rate. See our term note walkthrough for more information.

    For revenue sharing notes, payments to investors will correspond to their proportionate shares of the business’s revenue from the previous month. See our revenue sharing walkthrough for more information.

  • How long will I continue to receive monthly payments?

    For term notes, payments will be made monthly until the maturity date, unless a business chooses to pre-pay a part or all of the investment in advance. If a business pre-pays part of the principal in advance, the monthly payments would remain the same and the note would be paid off sooner than the maturity date.

    For revenue sharing notes, the exact length of time that it will take a business to pay all of its revenue sharing obligations cannot be known in advance since the business's revenues may vary during the payment period. However, if any balance remains outstanding on the maturity date, the business will be required to promptly pay the entire outstanding balance to investors.

    Monthly payments will continue until the business has paid investors in full pursuant to the terms of the applicable note purchase agreement. Once the business has paid in full, the investment contract ends.

    Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • How will I know whether a business has accurately reported its monthly revenue and I’ve received the correct monthly payment?

    Each business that completes a successful offering of revenue sharing notes is required to enroll in NextSeed's Payment Automation Service, which enables NextSeed to monitor the business's revenue on an ongoing basis.

    Additionally, each business is required to provide NextSeed with its tax return every year. If NextSeed determines that the amount paid by the business to its investors over the relevant year requires adjustment, the business will be required to make additional true-up payments to its investors.

Business Listing Process

  • Who can raise capital through an offering on NextSeed?

    Most types of business are eligible to raise capital through an offering on NextSeed so long as it meets the certain qualifications set forth in Regulation Crowdfunding. These qualifications, among others, require that the issuer be:

    • legally organized under the laws of a state or territory of the United States or the District of Columbia
    • a company that is not subject to certain reporting requirements of the Securities Exchange Act of 1934
    • a company that is not an investment company as defined in the Investment Company Act of 1940 or a company excluded from such definition under Section 3(b) or 3(c) thereof
    • a company (along with its affiliates) that has not sold more than $1 million through Section 4(a)(6) crowdfunding offerings in the previous 12-month period

  • Does NextSeed accept any business that applies to list an offering?

    No.  Each application must meet preliminary business requirements set by NextSeed and strict legal requirements under Reg CF.  In some instances, NextSeed will choose not to list offerings because of the characteristics of the business or the funding request.  For example, NextSeed does not accept a business that promotes offensive behavior (e.g. hate speech, encourage violence toward others) through its business or via the products or services offered for sale, and NextSeed currently only accepts Business to Consumer business models.

    Additionally, NextSeed completes a comprehensive standardized risk assessment of every proposed offering.  In addition to minimum credit requirements, standard financial metrics and prior owner experience, all businesses must reasonably project sufficient cash flow to pay all debt service obligations.  Existing businesses also need to demonstrate historical profitability.

  • How are the terms of an offering determined?

    NextSeed assesses every offering under a rigorous, standardized process. This is to determine if a prospective issuer fits the business categories offered on NextSeed. If a good fit is found, NextSeed helps the business determine the terms to offer to their prospective investors. When assessing the feasibility of a prospective offering, NextSeed typically considers the following key factors:

    • Historical Financial Performance - comparison of key financial ratios to industry standards to evaluate the business’s strengths and weaknesses
    • Projected Impact of Proposed Funding Terms - analysis of proposed funding terms' potential impact on the business's overall financial condition
    • Credit History Information - credit history of the business, as well as personal credit histories of key personnel
    • Leadership Experience and Stability - level of industry expertise and length of tenure of the business’s leadership
    • Industry Risk - overall success/failure rate in the relevant industry in which the business operates, according to historical data

    The final investment terms that are offered to prospective investors on NextSeed reflect NextSeed's and the issuer’s good-faith assessment and are not a guarantee or guidance of performance of any kind. Investing in securities inherently involves risks, and investors should consider their own investment objectives before investing.

Risks of Investing

  • Is investing on NextSeed risky?

    As with any investment, investing on NextSeed involves risk and investors may lose some or all of the principal invested. Investors may be subject to restrictions on canceling purchase orders, selling or transferring purchased securities.  Investors should not invest in a crowdfunding offering unless he or she can afford to lose the entire investment. Investors should review all disclosures provided by an issuer before making any investment.

    You should consult your own advisors and carefully review all information and disclosures provided by the business before making your investment. Past performance is not a guarantee of future performance, and you should be willing and able to withstand loss of your investment.

  • Are investment returns guaranteed?

    Investment returns are not guaranteed. By investing in a NextSeed offering, investors are entering into a contract with the business who agrees to pay the investors a certain amount over a certain time period. However, if the business cannot make its payments, investors may lose some or all of their investment. Before investing in a business on NextSeed, an investor should consider all of the risks associated with making the investment.

  • What happens to my NextSeed investments if NextSeed is no longer in business?

    Your NextSeed account and payment processes for your investments are facilitated by our partner bank, independent of circumstances affecting NextSeed. In the event NextSeed determines we are unable to continue our business operations, we pledge to allocate necessary resources to maintain staff and technology infrastructure sufficient to work with our partner bank to service existing investments.

Business Default or Bankruptcy

  • Can investors enforce remedies on their own?

    An investor cannot contact businesses directly for payment purposes. Any attempt to do so is a breach of the investment agreement.

  • What happens if the business does not make its monthly payments?

    If the business is more than 10 business days late in making a monthly payment, it is in default. NextSeed will take commercially reasonable steps on behalf of the investors to collect payment from the defaulting issuer, including hiring a third-party debt collection agency to enforce the debt. If the business has granted a lien on its assets or the principals have provided personal guarantees, NextSeed, as agent and on behalf of the investors, will also take steps to enforce the lien and guarantees.

    Note that the timing of payments reaching your NextSeed account may vary each month due to bank holidays and banking transfer times.

  • What happens if a business goes bankrupt?

    If a business goes bankrupt and defaults on its payments, NextSeed will take commercially reasonable steps on behalf of the investors to collect payment from the defaulting issuer, including hiring a third-party debt collection agency to enforce the debt. If the business has granted a lien on its assets or the principals have provided personal guarantees, NextSeed, as agent and on behalf of the investors, will also take steps to enforce the lien and guarantees.

    Here is more information about what happens when a business goes bankrupt.

  • When is a business with revenue sharing notes in default for not making payments?

    The monthly payment for a business with revenue sharing notes varies depending on its gross revenue for the applicable month. Here are a few possible scenarios:

    Assume a business with revenue sharing percentage of 10%.

    • If the business’s revenue for month X is $0, the required payment for month X is $0 * 0.10 = $0. The business is not in default for paying $0 to investors for month X.
    • If the business’s revenue for month Y is $10,000, the business’s required payment for month Y is $10,000 * 0.10 = $1,000. The business is in default if it does not pay $1,000 to investors for month Y.
    • At the end of the term, the business is in default if it has not fully paid its “Total Payment Amount”. The "Total Payment Amount" is calculated by multiplying the principal amount of the revenue sharing note by the applicable "investment multiple."

Bonus Rewards and Deal Updates

  • What are bonus rewards?

    Businesses may want to express gratitude for your support by providing certain rewards to their investors. Details about the bonus rewards for each deal are provided on the offering page.

  • Are bonus rewards covered by my investment agreements?

    No. Bonus rewards are offered by businesses purely on a voluntary basis, and are not governed by your investment agreements.

  • When are bonus rewards generally given out?

    You will be notified of the status of your bonus reward by the issuer via email. Generally, these updates are sent from support@nextseed.com, so please add this address to your contacts to receive all important communications!

    Businesses usually give out the bonus rewards around the time they officially open. If the business you invested in is already open, they will usually provide rewards within a month of the deal closing.

  • Where can I find updates from businesses I’ve invested in?

    Businesses are expected to send periodic updates after a successful campaign and prior to opening (if it is a new business). Updates will be sent via email from support@nextseed.com.

    You can also check the Updates Tab on the business's NextSeed offering page for summaries of their latest updates.

Taxes and Your Investment

  • What are the tax implications of investing on NextSeed?

    Each investor agrees to treat the investment agreements that it invests in on NextSeed as "debt instruments" (as defined in U.S. Treasury regulations) for U.S. federal income tax purposes. Returns from your NextSeed investments are reported as interest income for the applicable year.  Revenue sharing loans are classified as a contingent payment debt instrument, and the calculation is done at the end of the year when all payments for that year have been made.

    To assist with your tax filing, we will send investors who received any interest payments an IRS Form 1099 by end of January of the following year. Please consult your tax advisor if you have additional questions regarding taxes.

    NextSeed does not provide tax, financial or legal advice and this information is not intended to be tax, financial or legal advice. Investors should consult their own financial or tax advisors to determine the tax implications of any potential investment on NextSeed.

  • Are tax documents provided to investors?

    For each year that you’re an investor, you will receive an IRS Form 1099 by the end of January of the following year.

IRA Accounts

  • Can I invest through an Individual Retirement Account on NextSeed?

    Yes, you can! Investing on NextSeed is available for Individual Retirement Accounts. Your NextSeed IRA*, which can be Self-Directed Traditional, Roth, SEP or SIMPLE IRA, can be funded through contributions, transfers and rollovers from Qualified Retirement Plans (such as 401(k), 403(b), pension and/or 457 plans). The minimum deposit to open an IRA account is $5,000.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

    *IRAs permitted on NextSeed are provided by GoldStar Trust Company.

  • Who is my IRA custodian?

    To ensure a seamless service for your investments through NextSeed, we have partnered with GoldStar Trust Company, who will be the custodian for your NextSeed IRA. All IRA services for purposes of NextSeed investments are offered solely through GoldStar. NextSeed and GoldStar are not affiliated with one another, and NextSeed does not receive any fees from GoldStar in connection with new IRA accounts established by NextSeed members.

  • Can I convert my regular NextSeed investment account to a NextSeed IRA?

    No. A regular investment account at NextSeed cannot be converted to a NextSeed IRA. You may fund your IRA for investments on NextSeed with a cash contribution (check or wire transfer) or transfer or rollovers from your existing IRA or a Qualified Retirement Plan.**

    **This funding mechanism is specific to NextSeed; a taxpayer’s general ability to convert IRA accounts may differ. NextSeed does not provide any tax advice and this information is not intended to be investment or tax advice.

  • Why do I need a separate account for my NextSeed IRA?

    NextSeed currently requires separate accounts with separate email addresses for regular investment accounts and IRAs, as they are legally considered to be separate investment accounts that cannot be combined with other accounts.

  • What are the advantages of investing with a NextSeed IRA?

    A NextSeed IRA allows you to combine the returns of an investment in NextSeed offerings with the potential tax advantages of a retirement account. The IRS provides favorable tax treatment on IRA accounts. As a result, you won’t have to pay taxes on your investments while they are in your IRA account. See IRS guide to IRAs.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

  • What are my IRA investment limits?

    Your IRA investment limits are the same as a regular individual account, and will not be considered as separate from your regular account. Please note that the minimum deposit to open a NextSeed IRA is $5,000, which may be above your annual investment limit.

    Regulation Crowdfunding places limitations on the total amount investors may make Regulation Crowdfunding offerings within a 12-month period, depending on your income and net worth. NextSeed helps you keep track of your maximum limit on your account center. See the SEC's Investor Bulletin for the latest information. To summarize:

    • If your (including your spouse’s) annual income or net worth (calculated in accordance with Section 230.501 of the Securities Act is less than $107,000, you may invest the greater of (i) $2,200 or (ii) lesser of 5% of your annual income or net worth
    • If your annual income and net worth is greater than $107,000, you may invest the lesser of (i) 10% of your annual income or (ii) 10% of your net worth
    • Your total investments in Section 4(a)(6) crowdfunding offerings cannot exceed $107,000 per each 12-month period.

    The 12-month period is a rolling period starting from the date of your first investment. Note that the date of your first investment is when an offering officially closes, not when you commit to the investment.

  • Can I take a Required Minimum Distribution (RMD) from a NextSeed IRA?

    Yes, you can take a RMD from your NextSeed IRA. Please note that it is your responsibility to have cash available for withdrawal. To request a RMD, please contact IRAsupport@nextseed.com.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

                                          
  • Are there any tax documents provided to investors with IRA accounts?

    Investors with IRAs will not need to annually report their earnings to the IRS; therefore, NextSeed is not required to and will not provide Forms 1099 for IRAs.

    NextSeed is not a tax, investment or legal advisor and does not provide any tax, investment, or legal advice; please consult your own advisors or IRS guidelines to determine whether investing in NextSeed offerings through a self-directed IRA is right for you.

Investment Return Calculations

  • How does NextSeed calculate investment returns?

    NextSeed strives to provide a fair and reasonable measure of investors’ current investment performance, updated on a monthly basis in conjunction with the latest cash payments made by businesses. For this purpose, we are utilizing the concept of Net Annualized Return (“NAR”) to measure the current financial return on each investment in your portfolio. Generally speaking, with respect to a particular investment, NAR is an annualized measure of the rate of return on the principal invested over the life of such investment, calculated based on actual cash payments received each month, net of service fees, actual write-offs and actual recoveries. NAR is not a forward-looking projection of the performance of any investment, and reflects the full principal value of such investment until and unless such investment is written off.

    On NextSeed, we currently offer two types of investment products (a term loan and a revenue sharing loan), and NAR for each investment product is calculated differently to better reflect its underlying characteristics. Additional explanations for NAR calculations are described below.

    In addition, we have adopted the concept of Total Net Annualized Return (“TNAR”) to approximate the overall financial return on your investment portfolio, regardless of what type of investment you have made on NextSeed. TNAR is a weighted average of NARs on all current investments in your portfolio based on the formula described below.

    With respect to a particular investment, NAR is first calculated when an investor begins to receive payments from the underlying business (usually after the first full month following the closing date, or following the initial startup period, as applicable). Until that time, NAR will display as "New" and no calculation will be available, and only the investments that have NAR will be considered in your TNAR calculation.

  • How does NextSeed calculate NAR for a term note?

    NAR for a term note is calculated using the following formula, which is applied to each monthly period ending during the term of a term note from the 1st full month following the closing date to the final and Nth month of such term:

    This formula is applicable to any monthly period during the term of a particular note, where the "i" refers to such monthly period. If during any monthly period no payments are received by the investors, then the interest and late fees received (if any) and service fee paid, in such monthly period will be zero. If a particular note is written off, we subtract the entire outstanding principal amount of the note from the numerator. But if a portion of such written off note is later recovered, we add back the amount recovered net of applicable fees. Once the net payment amount is determined for a particular monthly period, we divide such amount by the outstanding principal as of that monthly period. This calculation yields a fraction for the monthly period.

    This calculation is performed for each monthly period, taking into account all interest received, late fees received, service fees paid, and all charge offs and recoveries made relative to the principal outstanding in such monthly period. We then annualized the result of the calculation by taking the sum of (1 + the dollar-weighted average performance for all monthly periods), raising it to the 12th power, and subtracting 1. This calculation results in NAR for a term note, which is expressed as a percentage.

  • What are the limits of NAR and TNAR return calculations?

    The NAR and TNAR calculations described above represent only one of many different ways to calculate and measure the return on cash invested. There are other methods for evaluating the historical and potential investment returns on fixed-income securities and other investments that you may prefer to use to assess the performance of your investments. As NextSeed is unable to provide any other measure of investment returns other than as described above, you should consult your financial advisors if you have any questions about measuring your investment returns.

Basics

  • How much does it cost for me to create and launch an offering on NextSeed?

    There is no charge for registering with NextSeed and completing the application process in order to find out potential funding terms.

    If you decide to proceed with creating an actual offering, our partner bank and escrow agent, GoldStar Trust Company, will charge a one-time $500 escrow setup fee. You may also incur 3rd-party fees, such as for a CPA, architectural renderings, videos and other business costs. NextSeed charges a crowdfunding fee equal to 10% of the total amount raised (subject to discounts if you bring your own investors), payable only if your offering is successful.

  • Why can only U.S. businesses raise capital on NextSeed?

    NextSeed is operating under Regulation Crowdfunding laws, which allow only U.S. businesses to raise capital by crowdfunding in the United States.

  • What businesses are you looking for? Can startups apply?

    New business startups are welcome to apply to be listed on NextSeed – many businesses on NextSeed are new. We focus on helping consumer-facing, brick-and-mortar businesses in the food and beverage, health and wellness, fitness, hospitality and co-working industries.

    However, we are happy to review your business plan to see if we’re a good fit for your needs. Please keep in mind that businesses are expected to make monthly payments to investors, and therefore you should expect your business to start generating revenues shortly after opening.

  • How much money can my business raise on NextSeed?

    NextSeed can help your business raise anywhere from $50,000 to $1,070,000 per offering. A business may launch follow-up offerings on NextSeed but can only raise up to $1,070,000 under Section 4(a)(6) crowdfunding offerings during any 12-month period under Regulation Crowdfunding.

  • How are the terms of an offering determined?

    NextSeed assesses every offering under a rigorous, standardized process. This is to determine if a prospective issuer fits the business categories offered on NextSeed. If a good fit is found, NextSeed helps the business determine the terms to offer to their prospective investors. When assessing the feasibility of a prospective offering, NextSeed typically considers the following key factors:

    • Historical Financial Performance - comparison of key financial ratios to industry standards to evaluate the business’s strengths and weaknesses
    • Projected Impact of Proposed Funding Terms - analysis of proposed funding terms' potential impact on the business's overall financial condition
    • Credit History Information - credit history of the business, as well as personal credit histories of key personnel
    • Leadership Experience and Stability - level of industry expertise and length of tenure of the business’s leadership
    • Industry Risk - overall success/failure rate in the relevant industry in which the business operates, according to historical data

    The final investment terms that are offered to prospective investors on NextSeed reflect NextSeed's and the issuer’s good-faith assessment and are not a guarantee or guidance of performance of any kind. Investing in securities inherently involves risks, and investors should consider their own investment objectives before investing.

  • What are the tax implications of raising capital on NextSeed?

    Each business agrees to treat the investment agreements in its offering as "debt instruments" (as defined in U.S. Treasury regulations) for U.S. federal income tax purposes.

    NextSeed does not provide tax, financial or legal advice and this information is not intended to be tax, financial or legal advice. Businesses should consult their own financial or tax advisors to determine the tax implications of raising capital on NextSeed.

  • Is debt right for my business?

    Debt financing through a NextSeed raise can take the form of senior or mezzanine debt financing. Senior debt would replace a bank loan. Mezzanine debt would replace the need for you to contribute more cash, replace the need for additional equity investors and can satisfy a bank’s required debt-to-equity ratio if you are getting a bank loan.

    Two key criteria that apply to any type of debt crowdfunding are that (1) crowdfunding should not be the single source of financing and (2) the business must be capable of generating sufficient revenue in the near term to service the debt. A business that can satisfy both of these criteria can utilize debt crowdfunding as part of its overall financing strategy.

    Keep in mind that crowdfunded debt securities (both mezzanine and senior) generally have higher rates than bank loans. This is mainly because they have less restrictive covenants – for instance, personal guarantees may not be required.

  • Aside from obtaining financing, what else does fundraising on NextSeed help me accomplish?

    With NextSeed, you get to have the community engaged in the process. On average, NextSeed campaigns receive nearly 10,000 unique visitors who spend an average of 5 minutes on each page. That’s a lot of eyeballs. Plus, you get our team’s expert marketing and public relations support throughout the process.

    Successful issuers gain an army of investors who will promote your business, refer friends and family and become your customers.

Offering Application Process

  • How can I list my business on NextSeed?

    Businesses interested in listing on NextSeed can submit an initial application (about 5 minutes) by completing a Business Sign Up.

    Please have all your information ready to fill in, including Gross Sales, COGS, Operating Expenses and Net Income, Total Project Cost, and Expected Raise on NextSeed.

  • Does NextSeed accept any business that applies to list an offering?

    No.  Each application must meet preliminary business requirements set by NextSeed and strict legal requirements under Reg CF.  In some instances, NextSeed will choose not to list offerings because of the characteristics of the business or the funding request.  For example, NextSeed does not accept a business that promotes offensive behavior (e.g. hate speech, encourage violence toward others) through its business or via the products or services offered for sale, and NextSeed currently only accepts Business to Consumer business models.

    Additionally, NextSeed completes a comprehensive standardized risk assessment of every proposed offering.  In addition to minimum credit requirements, standard financial metrics and prior owner experience, all businesses must reasonably project sufficient cash flow to pay all debt service obligations.  Existing businesses also need to demonstrate historical profitability.

  • What other information do I need to provide to launch an offering on NextSeed?

    We will require basic information to determine your eligibility to list a Regulation Crowdfunding offering. If eligible, you will need to provide additional documentation, including:

    • the last 3 years of your business’s tax returns (if available),
    • a balance sheet, income statement and statement of cash flow for the last 3 years and the current year to date (if available),
    • bank statements of the company for the last 6 months,
    • a 5-year pro forma financial projection, and
    • a copy of your rental lease agreement (if your funding request is for a new location).

  • How is the funding goal for an offering determined?

    After you submit the minimum amount of funding your business would like to raise, NextSeed will evaluate your business's financial statements to determine if the proposed minimum funding goal makes sense for you. You can also set a maximum funding goal, subject to the same approval process.

  • Does my business need to provide a security interest?

    Yes, businesses are required to provide a general blanket lien in their business assets.  In the event a business has obtained senior secured debt, the security interest can be a second or subordinated lien position.

  • Do I have to provide a personal guarantee?

    A personal guarantee by the principal owner(s) of the business is recommended but not required. Providing a personal guarantee provides investors with additional comfort and security regarding their investments. Lack of a personal guarantee will affect the risk profile of the offering and potentially affect the investment terms for the offering.

Offering Preparation Process

  • I’m approved! How do I go about creating my offering page?

    NextSeed will send you offering preparation materials to help you think about how to present your offering, the legal requirements, and etc. You will also need to provide NextSeed with any photos, renderings and videos that you wish to use in your campaign. NextSeed will help you set up your offering page prior to launch.

  • Do I have to provide bonus rewards?

    No. Each business has the discretion to offer bonus rewards to investors as part of its crowdfunding offering, which can create additional excitement and loyalty among investors. While bonus rewards are offered on purely a voluntary basis, any business that commits to doing so is expected to use all commercially reasonable efforts to honor its commitment.

  • Can I set a minimum or maximum investment amount for investors?

    No, the minimum investment amount is $100, and each investor’s maximum investment amount is subject to aggregate investment limits set by Regulation Crowdfunding. Investments are accepted in $100 increments within this range.

Marketing Your Offering

  • Does NextSeed help businesses find investors?

    NextSeed is constantly working through various channels to increase its network of investors. NextSeed also provides business owners with crowdfunding tools and strategies within the confines of Regulation Crowdfunding so they can leverage their own networks (e.g., family, friends and customers) and increase the likelihood of a successful offering.

Reaching My Funding Goal

  • What happens when investors commit to invest in my business?

    Committed investors will be required to contribute their funds into an escrow account managed by an independent escrow agent after the last 48 hours before the end of the offering period. All investments will be held in escrow until the offering successfully closes or is terminated.

  • What happens when my business meets its funding goal?

    You will be notified promptly after your business meets its minimum funding goal. If the business also has a maximum funding goal, it can continue to accept investments until the maximum funding goal has been met (at which point you will be notified promptly and no more investments will be accepted).

    After a funding goal has been met, each investment agreement previously signed by the investors will need to be signed by your business (or its agent or designee) before the investors’ committed funds are released to your business.

  • What happens if my business has not reached its funding goal by the end of the offering period?

    If the offering still doesn’t meet its minimum funding goal at the end of the offering period, all previously committed funds will be returned to the investors. You may then choose to launch a new offering with a different offering page and different investment terms.

  • What does my business have to do after successfully closing its offering and receiving the offering proceeds?

    Your business is encouraged to keep its investors and NextSeed informed of important progress and updates. Expect to provide monthly updates to investors prior to your business opening - dialogue and communication will help create and keep advocates for your business. NextSeed will assist you in communicating with investors.

    If you have offered bonus rewards to investors, please keep investors up-to-date as to when they can expect to receive the bonus rewards (usually around the time your business opens). If your business is already open at the time of closing your NextSeed campaign, be prepared to distribute bonus rewards within 30 days of closing.

Making Payments on Term Notes

  • How does my business pay investors back on a term note?

    Your business will have a fixed monthly payment that is due each month.

  • How long will my business be required to make payments to investors?

    Monthly payments will continue until your business has paid investors in full, and prior to the maturity date. For term loans, businesses agree to pay a predetermined fixed amount throughout the term of the loan.  Additionally, businesses may opt to pre-pay the entire outstanding principal balance anytime with no pre-payment penalty.

    *Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • Is there a minimum payment each month?

    Yes, the minimum payment each month is the fixed payment amount you have agreed to pay each month.

Making Payments on Revenue Sharing Notes

  • How does my business pay investors back on a revenue sharing note?

    Your business will be obligated to report its monthly revenues to NextSeed in order to calculate the amounts of monthly payments.

    Upon receiving your business's monthly revenue information, NextSeed will calculate the monthly payment amount to be paid to investors. You will verify the payment amount, and NextSeed will debit your business's bank account via ACH. NextSeed will then make proportionate disbursements to your investors.

    As part of the NextSeed revenue verification process, your business must provide a copy of its tax return to NextSeed on an annual basis. Any discrepancies between tax returns and previously reported revenues will be resolved by making additional true-up payments to investors, if necessary. Aside from the amounts of any true-up payments, no other financial information received by NextSeed for verification purposes will be disclosed to investors.

  • How long will my business be required to make payments to investors?

    Monthly payments will continue until your business has paid investors in full.

    For Revenue Sharing Loans, the exact length of time that it will take for your business to pay all of its revenue sharing loan obligations cannot be known in advance since your business's revenues may vary during the payment period (monthly repayments are based on a fixed percentage of the business's gross revenue on a monthly basis until the total payment amount has been paid in full).  Although there is a predetermined maturity date, the total payments could be paid to investors prior to such date if the future gross revenues during operations are greater than originally expected.  On the other hand, if revenues are lower than expected throughout the duration of the loan, the business may have a balance that it is contractually required to pay in full at the maturity date.

    *Note that debt securities offered on NextSeed are not guaranteed or insured and investors may lose some or all of the principal invested subject to an issuer’s ability to fully service the debt and not default.

  • Is there a minimum payment each month? What if my business doesn’t generate any revenue during a particular month?

    If your business doesn’t generate any revenue during a particular month, there is no payment obligation for that month. Note that your business must still report its revenue to NextSeed on a monthly basis regardless of how much revenue is generated. Failure to report monthly revenue may trigger a default under the note purchase agreement and result in all amounts owed to investors becoming due immediately.

  • When does my business need to report its revenue each month?

    At the beginning of each month, your business is required to report its gross revenue for the prior month. NextSeed will use this number to calculate the monthly payments owed to investors.


If you still have questions, please don’t hesitate to contact us at info@nextseed.com.