Frequently Asked Questions | MainVest

Frequently Asked Questions

For Investors

What is MainVest.com?

MainVest.com is a website where you can browse opportunities to lend money to small businesses.

What kinds of businesses?

We try to focus on local, brick-and-mortar businesses, possibly a business in your neighborhood that you already know.

Who can invest in these opportunities?

Anyone can invest, as long as you’re 18 or older and have a U.S. bank account.

Are there fees to join?

No, it’s absolutely free for investors to join.

Do I have to join?

You can browse the investment opportunities and read questions and comments in our chat rooms without an account, but to actually make an investment or participate in the chat rooms, you need to create an account.

Why would I invest in a small business?

We believe the investments offer attractive potential returns while enabling you to support businesses in and around your community, rather than mega-corporations and international behemoths.

Is this a Crowdfunding site?

Yes. All of the opportunities at our site are offered under either:

  • Section 4(a)(6) of the Securities Act of 1933, which is often referred to as “Regulation Crowdfunding” or “Regulation CF” or “Title III Crowdfunding”; OR
  • Rule 506(c) of Regulation D, issued by the Securities and Exchange Commission, which is limited to so-called “accredited” investors, often referred to as “Title II Crowdfunding.”
Aren’t there other kinds of Crowdfunding?

Yes. The JOBS Act of 2012 created three kinds of offerings, all of which are sometimes referred to as Crowdfunding. The third kind is Regulation A issued by the Securities and Exchange Commission, often referred to as “Title IV Crowdfunding” or “Regulation A” or “Regulation A+.”

Do you plan to offer Regulation A also?

Maybe someday, but not now.

Is this like Kickstarter?

No! In Kickstarter, you make donations to businesses and get nothing in return other than “rewards” (e.g., a backpack, new watch, etc.). On our platform you are actually making debt-based investments with the goal of getting a financial return tied to either the term loan’s structure or the success of the business.

What’s an “accredited” investor?

If you’re an individual, you’re an “accredited” investor if any following describes you:

  • Your own income has been at least $200,000 for each of the last two years and you expect it to be at least that much this year.
  • Your combined income with your spouse has been at least $300,000 for each of the last two years and you expect it to be at least that much this year.
  • Your net worth is at least $1 million, excluding your primary residence.
Are your Regulation CF offerings and your Rule 506(c) offerings conducted by the same company?

No. Our Regulation CF offerings are conducted by MainVest, Inc., while our Rule 506(c) offerings are conducted by MainVest Funding Solutions, LLC.

Why do different companies conduct the two kinds of offerings?

A Regulation CF offering may be conducted only by a “funding portal” that is registered with the SEC and a member of the Financial Industry Regulatory Authority, or FINRA. And a “funding portal” is not allowed to do anything else. That’s why we use MainVest, Inc., which is a “funding portal,” to conduct the Regulation CF offerings and a different company, MainVest Funding Solutions, LLC, to conduct the Rule 506(c) offerings.

Will you conduct Regulation CF offerings and your Rule 506(c) offerings for the same businesses?

Yes, that’s typically what we plan to do.

Why?

In a Regulation CF offering, the amount that each investor can invest is very limited, even for accredited investors. Conversely, in a Rule 506(c) offering accredited investors can invest any amount. Thus, we conduct a Regulation CF offering “side-by-side” with a Rule 506(c) offering so anyone can invest, but accredited investors can invest more.

Do you list every business that applies? If not, how do you decide which companies to list?

No, we don’t list every business that applies. We base our decisions on certain proprietary benchmarks, the business’s eligibility as defined through the FINRA and SEC regulatory framework, and also our own, subjective view of the business and its management team.

YOU SHOULD NOT INTERPRET THIS AS INVESTMENT ADVICE. WE ARE NOT INVESTMENT ADVISERS.

Is the information I give you secure?

Yes. We use SSL (Secure Sockets Layer) for security by making an encrypted link between your browser and our associated servers. SSL is an industry standard for protecting the integrity of online transactions.

Under our Privacy Policy, we won’t sell or share your personal information with anyone.

Are these safe investments?

Far from it! All of the opportunities on our site are small businesses with limited resources. Some are unable to borrow money from banks or other traditional sources. It is very likely that some of the companies listed on our site will fail to repay their loans. These opportunities are only for investors who can handle losing some or all of their investment.

Is this like investing in the stock market?

It’s similar only in the sense that you are investing in a business. Otherwise, it’s very different:

  • The businesses you see on our site will be much, much smaller than those listed on public stock markets, with a much higher risk profile.
  • Businesses listed on public stock markets have gone through a rigorous process with the SEC before being listed. Businesses on our site have gone through no such process.
  • By listing on a public stock market, a business typically gains access to broad and deep sources of capital. The businesses on our site have no such access.
  • Businesses listed on public stock markets typically have a seasoned, professional management team. Most of the businesses on our site are run by the founders.
What are some of the risks of investing?

Our Educational Materials list some of the generic risks of investing. The information each business provides should also include business-specific risks.

Where can I learn more about the businesses?

When you click on a business, you’ll see a lot of information right away. For more information, you can navigate to financial information, business plans, risk factors, and other detailed information. You can also use the chat room to ask questions directly to the owner of the business.

How will I report my income for tax purposes?

You will report your income as interest.

Does the government review these investments?

No. No Federal or State agency reviews these investments. You and your advisers have to make the decision whether to invest.

How much should I invest?

That’s entirely up to you and your investment advisers. As a general matter, most people recommend a balanced portfolio that includes both low-risk and high-risk investments, with the right mix based on lots of factors including your age and your own tolerance for market fluctuations. As you consider how much to invest, you should definitely think of the projects on our site as high-risk investments.

By law, we are required to limit how much you can invest in Regulation CF offerings. When you create your account, we’ll ask for your annual income and net worth, which tells us how much you can invest. For more information, see our Educational Materials.

Are there minimum investments?

The business itself will stipulate a minimum investment in each project, usually $100.

How should I choose among all the businesses on the site?

We are not investment advisers and are not allowed to provide investment advice. If you’re not sure, you should consult with your own financial and investment advisors.

If I invest in one of these businesses, do I become personally liable for anything?

No, not at all. You are only personally liable only to make your investment in the amount you designate.

What will I own if I invest?

You will own a promissory note or revenue-sharing note of the business that borrowed the money.

Is that the same as owning stock?

No. If you own stock in a business, you are a part owner of the business itself. When you own a promissory note or a revenue-sharing note, you are a creditor of the business.

If the business is very successful, will I make a lot of money?

It depends on the kind of investment you make. If the investment is a simple loan, the most you can receive is your money back, plus interest. If the investment is based on the revenue of the business, you could earn more.

Will anyone guarantee my investment?

In some cases an owner of the business will guarantee all or part of your investment. In other cases nobody will.

How do I pay for my investment?

Usually by a transfer straight from your bank account.

Where does my money go when I invest?

Your money is held safely in an escrow account (which we don’t control) until the project is fully subscribed, i.e., until the full amount is invested. Then, it is distributed to the sponsor of the project, less our fee. If the project is not fully subscribed, your money will be returned to you without any deduction.

Can I cancel my investment?

Yes. You can cancel at any time until 48 hours before the offering deadline established by the business.

Can the business cancel my investment?

Yes. The business has the right to accept or reject investments in its sole discretion. But once the business accepts your investment (and takes your money), it cannot cancel.

Can the business change the amount of my investment?

If more investors sign up than the business needs, the business will usually have the right to reduce the amount invested by each investor (how the reduction will be applied will be disclosed for each opportunity). The business will never have the right to increase your investment.

Can I invest through my IRA?

Usually, yes.

Will I be able to sell my promissory note or revenue-sharing note?

Generally speaking, no. For one thing, there won’t be an active market, meaning you probably won’t be able to find any buyers. For another, the business might restrict your ability to transfer your promissory note. Finally, any transfer of your promissory note would have to comply with the securities laws.

Can I track the performance of my investments?

Yes, we give you a tool – we call it our Dashboard – to keep track of all the investments you make at our site.

For Businesses

What is MainVest.com?

MainVest.com is a website where you can apply to borrow money from investors.

Is this a Crowdfunding site?

Yes. All of the opportunities at our site are offered under either:

  • Section 4(a)(6) of the Securities Act of 1933, which is often referred to as “Title III Crowdfunding” or “Regulation Crowdfunding” or “Regulation CF”; OR
  • Rule 506(c) of Regulation D, issued by the Securities and Exchange Commission, which is limited to so-called “accredited” investors, often referred to as “Title II Crowdfunding.”
Aren’t there other kinds of Crowdfunding?

Yes. The JOBS Act of 2012 created three kinds of offerings, all of which are sometimes referred to as Crowdfunding. The third kind is Regulation A issued by the Securities and Exchange Commission, often referred to as “Title IV Crowdfunding” or “Regulation A” or “Regulation A+.”

Do you plan to offer Regulation A also?

Maybe someday, but not now.

Is this like Kickstarter?

No! In Kickstarter, a business asks for money in the form of donations, and gives donors only “rewards.” On our platform you are actually borrowing money with the expectation that you will give investors their money back plus a return.

Are your Regulation CF offerings and your Rule 506(c) offerings conducted by the same company?

No. Our Regulation CF offerings are conducted by MainVest, Inc., while our Rule 506(c) offerings are conducted by MainVest Funding Solutions, LLC.

Why do different companies conduct the two kinds of offerings?

A Regulation CF offering may be conducted only by a “funding portal” that is registered with the SEC and a member of the Financial Industry Regulatory Authority, or FINRA. And a “funding portal” is not allowed to do anything else. That’s why we use MainVest, Inc., which is a “funding portal,” to conduct the Regulation CF offerings and a different company, MainVest Funding Solutions, LLC, to conduct the Rule 506(c) offerings.

Will you conduct Regulation CF offerings and your Rule 506(c) offerings for the same businesses?

Yes, that’s typically what we plan to do.

Why?

In a Regulation CF offering, the amount that each investor can invest is very limited, even for so-called “accredited” investors. Conversely, in a Rule 506(c) offering investors who are “accredited” can invest any amount. Thus, we conduct a Regulation CF offering “side-by-side” with a Rule 506(c) offering so anyone can invest, but “accredited” investors can invest more, making it more likely your loan will be funded.

How do I raise money for my business on MainVest?

The first step is to create a business account, which takes about five minutes. We’ll then guide you through the application process.

Is there an application fee?

Nope! Creating a business account and building out your potential offering on MainVest is completely free. MainVest will only take a fee (our Funding Securement Fee) upon the successful closing of your offering.

What’s the maximum I can borrow?

The most you can raise using Regulation CF is $1,070,000, while there is no limit to the amount you can raise using Rule 506(c).

With that being said, the majority of small businesses raising money on MainVest will raise between $50,000 and $500,000.

Do you restrict how I can use the loan?

No.

What are the typical terms of the loans I could get on your site?

You can raise money on MainVest using simple term loans or revenue-sharing loans. As the business, you have control over the terms for your specific offering (e.g. maturity date, interest rate, etc.)

Terms should be set to allow the business to grow and succeed while generating returns for investors.

Will I have to pledge collateral?

That’s up to you. You can (1) personally guaranty the loan, (2) pledge collateral, or (3) offer no security at all.

Will I have to personally guarantee the loan?

No.

What are your criteria for listing loans?

We base our decisions on certain proprietary benchmarks and also our own, subjective view of the business and its management team.

How long will it take you to decide whether to list my loan?

Generally, you’ll know within five business days

Do you lend the money?

No, we are only an intermediary in the process. The loans will be made by investors who sign up at the site.

If you accept my application, am I guaranteed to be funded?

No. If we accept your application, it just means your loan will be listed on the site.

What kind of investors will register at your site?

Anyone can register and invest, as long as he or she is 18 or older and has a U.S. bank account.

Can I ask my customers to participate?

Yes! You have to be careful how you advertise, but you can direct your customers to our site, where they can decide whether to participate in the loan. Your MainVest Business Dashboard also provides tools and resources to help get the word out.

What kind of information will I have to provide?

The SEC requires that you provide lots of information about the business, including financial information.

Will the information I provide be kept secret?

No, the whole world will be able to see your information on our site.

How long does the process take, start to finish?

There are two phases, the Set Up phase and the Live phase.

During the Set Up phase, you work with us to fill out and file the proper regulatory disclosures, identify the proper structuring of the investment security you will be offering, and design your offering page. That usually takes 15 - 30 hours over 1 -2 weeks.

The Live phase starts when your offering goes live and ends when (1) you’ve raised all the money you’re trying to raise, or (2) the duration of the offering ends, typically 30 - 90 days.

Does the government have to approve these loans?

No. No Federal or State agency reviews or approves of these loans.

How do you make money?

The way MainVest, Inc. is compensated is explained in our Educational Materials. And for each offering we will disclose exactly how much we are being paid.