On NextSeed, businesses can raise capital by offering securities to the public. Similar to how large corporations launch IPO’s to sell stocks to the public, small businesses can now sell securities on NextSeed to raise capital.
There are three types of securities that are offering on NextSeed: 1) Term Notes, 2) Revenue Sharing Notes, and 3) Preferred Equity.
Term notes offer fixed monthly payments at a set interest rate. Each month, your payments are steady and predictable. Plus, with no prepayment penalty, you can pay off the entire balance early without incurring a fee.
This is great for businesses with steady cash flow and the ability to start making payments immediately.
With Revenue Sharing notes, you’re sharing a percentage of gross monthly revenues until you fulfill a total payment back to investors.
The structure gives you the flexibility you need to succeed. This is ideal for new businesses that have a ramp-up time (e.g. construction) or are driven by seasonality.
Selling Preferred Equity offers flexibility for business owners. Payments and dividends are based on actual profits or net cash flow and don’t require collateral in the business. Selling ownership to investors aligns your interests and allows investors to share in the success of the business.
There are several situations that make the selling of equity the best choice for a business. Equity may be best for high growth businesses that are looking at a long-term return. Some businesses need to reinvest all their cash flow back into the business to support their long-term growth. Consumer packaged goods (CPG) companies are a good example. Other instances may require that a business raise significant amounts of capital and are at an earlier stage of fundraising.
This option may also fit businesses that are also seeking capital that can leveraged for a larger bank loan or debt raise while eliminating strict remedies if the investment is not paid back timely.