A few months ago, a crowdfunding bill was signed into law by the President.  This bill comes as part of the JOBS Act and has the potential to seriously change the way businesses raise capital in the very near future.  Although you can’t take advantage of it just yet, if you’re in the market for capital, you should know what it has in store for you and fundraising in the future and some of the options that will be available to you.

As things are now, entrepreneurs are turning to friends and family for money as well as using crowdfunding sites like KickStarter, and IndieGoGo to raise money in the form of donations , or angel investor platforms such as Gust and Angellist to raise actual investments from wealthy “accredited” investors.  This bill however, will change things up a bit, especially for crowdfunding sites like the ones listed above.

What does the bill say?

According to a recent article on Forbes, some of the most important things to know about the bill are:

• Entrepreneurs can raise up to $1MM annually from as many people as they want and it’s important to note here that there are no restrictions on who can be an investor.

• Investments will be capped at $100K, per investor, per year.

• Entrepreneurs looking to raise funds under this bill must have their business incorporated in the United States before fundraising starts.

• Businesses will also be required to file financial information annually with the SEC and disclose their business plan.

• All fundraising must go through a registered crowdfunding platform.

How will this affect me?

Good question.  Angie Chang does a great job spelling out the benefits in her post, What Does The Crowdfunding Bill Mean for Women Entrepreneurs?

In short, the benefits to you in terms of raising capital are really great.  You can start raising money earlier on in your business’s lifecycle, you can accept investments from anyone, including unaccredited investors (think friends, family…) with a net worth less than $1MM, and you can set your own terms. What works for one business, may not be the route for yours so this bill gives businesses the opportunity to explore those other options.

Despite all the great opportunities this crowdfunding bill creates it will not be effective until the SEC finalizes the specifics for the new law. This is expected to happen at the beginning of 2013.

Is there an alternative to raise investments through crowdfunding today?

Yes, meet Bolstr.  Bolstr is the first investment based crowdfunding platform that helps entrepreneurs raise capital from people in your network and community, and easily comply with the regulatory system as it stands today.  In fact, Bolstr was built to comply with the today’s laws so this new crowdfunding bill will only help them expand their capabilities to help you raise capital.  As it stands today Bolstr allows you to raise money from unaccredited investors BUT in a private manner.  With the crowdfunding bill, as mentioned above, you must be public with your financials as well as your business plan, which may not appeal to many small business owners. On Bolstr this information remains private to individuals you know from your network and community.

To use Bolstr, you’d set up a private fundraising campaign and then invite people to invest.  Once your campaign starts, you will still only have a certain amount of time to reach your goal.  One thing to note that is pretty cool though is that by using Bolstr to raise funds, you’re not actually giving up any equity; instead you are doing a revenue share, which means you will share a percentage of top line revenue with your investors for a defined period of time. If your company does well, your investors benefit, but if your company has a rough few months, then your investors are paid out accordingly as the revenue shares is directly correlated to your business’ fluctuation.

In short, from a business owners perspective, you get to raise the money you need, in a private, secure fashion and from an investors perspective there is an uncapped upside during the term of the agreement.

While there is no one perfect fit for everyone, there is something out there for everyone and it looks like this crowdfunding bill will only help. But, we’ll have to wait and see!