The SEC has extended its temporary relief for small businesses using Regulation Crowdfunding to raise capital, as a response to the continued need in the wake of COVID-19.
The eligible dates and expiration dates are being extended as follows:
Previously Extended dates
(Offerings must be filed by this date)
May 4th, 2020 –
August 31, 2020
May 4th, 2020 – February 28, 2021
(Offerings must be closed by this date)
March 1, 2021 September 1, 2021
Read the full release from the SEC here: https://www.sec.gov/rules/interim/2020/33-10829.pdf
On May 4th, 2020, the SEC issued a temporary expansion of certain provisions of Regulation Crowdfunding in order to increase access to capital for small businesses. SEC PRESS RELEASE
NextSeed Co-Founder/CEO Youngro Lee, as a member of the SEC Small Business Capital Formation Advisory Committee, has been engaging and advocating for these changes, and we believe the increased funding limits and flexible requirements will help business owners get access to capital more quickly.
This is an opportunity for growing small businesses (companies that have been formed and operating for at least 6 months) to expedite a capital raise under the Regulation Crowdfunding exemption.
Here are some of the highlights: (See table below for more detailed information)
Campaigns were previously required to stay open for at least 21 days. Under the expanded rules, campaigns can now close within 48 hours of meeting their minimum targets.
Businesses are no longer required to provide third-party CPA reviewed financials for raises up to $250,000 (previous threshold was $107,000).
These rule changes are temporary. Only offerings launched before 8/31/20 are eligible to leverage the new guidelines.
Many growing businesses need access to capital in the current market for different reasons. Some are seeking additional working capital to help weather the current economic challenges. Other businesses have seen venture capital and private investors back off of current funding rounds for reasons beyond their control.
This set of rule changes will help businesses that need new opportunities to raise capital and build a stronger marketing platform for continued growth. Specifically, startups that are raising their Seed, Series A, or Bridge rounds are best suited to carve out a portion of their capital needs under these rules. It is also now easier and faster to raise a Community Bridge Note, a newly launched debt product on NextSeed that is aimed to help entrepreneurs navigate the current and immediate business challenges presented by COVID-19.
These SEC rule changes are temporary, though, and businesses that need to raise capital will need to move quickly.