Michigan businesses have a new financing option: the Michigan Invests Locally Exemption (MILE).
When banks and family members won’t loan or invest, businesses have used crowdfunding sites like Kickstarter as a way to raise money. However, they’ve had to structure the campaign so contributors got a reward or product in exchange for their money (as opposed to equity in the business). To get equity for your investment generally meant you had to be an “accredited investor,” which the Securities and Exchange Commission defines as a person with a $1-million net worth and over $200,000 in annual income the past two years.
The JOBS Act authorizes unaccredited investors to invest in startups at the national level. The rules for this new crowdfunding were published for comment in October 2013 and should be finalized this year.
However, effective December 31, 2013, the Michigan Invests Locally Exemption (MILE), Public Act 264, lets unaccredited Michigan investors invest up to $10,000 (per project, per year) in Michigan businesses via certain crowdfunding sites. A business can raise up to $1 million or, if it has audited financials, up to $2 million. The law requires that all investors have to be located in Michigan, and the business must be located in Michigan, too. There are currently two crowdfunding platforms you can use: LocalStake (to invest in local businesses) and Fundrise (to invest in local real estate).
The first Michigan business to use equity crowdfunding was the Tecumseh Brewing Company—you can view the offering here. In addition to equity, investors also got food and drink discounts and other perks (pre-MILE, this was the only thing crowdfunding donors could get). The Tecumseh Brewing Company’s goal was to raise $175,000 in 90 days, and it reached its goal in about half that time. Importantly, the brewery has leveraged its MILE capital to secure a $200,000 bank loan it previously could not get.
To learn more about MILE, visit CrowdfundingMI.com, the Michigan Municipal League’s website to educate people about the law. The site gives a good overview of MILE, and its blog highlights businesses and real estate projects undertaking MILE crowdfunding. You can also visit the Intrastate Equity Crowdfunding page on the LARA site, which includes “Issuing and Investing in Securities through Crowdfunding: Frequently Asked Questions.”