You're a regular at the farmers' markets, and you want to connect with your loyal customers. Or, you're just starting a new business, and your land is tied up in a mortgage but you need to buy some new equipment. Or, you're an experienced farmer who wants to try some new crop that no one else in the area is growing. These are all reasons why you might consider crowdfunding your farm.
Crowdfunding is about raising money for your project with contributions from many people. It is usually thought of as something done on the Internet. But, it doesn't have to be done on the internet, and in some cases it can be better to not use the internet.
On December 30, 2013, a new Michigan law went into effect, the Michigan Invests Locally Exemption. This law allows Michigan companies to sell shares of ownership directly to people within Michigan, without the red tape of normal sales of stock. Under this law, a Michigan business can raise up to two million dollars from Michigan residents in a one year period, with very little paperwork.
Some examples of how this could work for your farm are:
- A vendor at a farmers' market wants to give buyers a good reason to keep coming to her stall. She could decide to raise some money to expand her selection by offering a small percent ownership in her business to her regular customers. They would have another reason to stop by her stall, and she would have more products to attract more customers.
- You're eager to try growing an acre of hops on your farm to try out the local microbrewing craze in West Michigan, but you don't want to owe a bank more money if it doesn't work out. Instead, you could raise money by selling shares at local beer-enthusiast groups or by contacting local brewers.
There are some limits set by the law:
- You must raise the money within 12 months.
- You are limited to one million dollars, unless you provide investors with audited financial documents.
- You can't accept more than ten thousand dollars from the average investor. Wealthy investors and businesses may be able to purchase more shares.
- All investors must be Michigan residents.
- You can not promote the investment outside of Michigan in any way. Even a post on Twitter could be a problem.
- The money must be kept by a third party (usually a bank) until you reach the fundraising goal you've set. If you don't make your goal, all the money must be returned.
There are other details as well, so you should speak to an experienced attorney before starting your own crowdfunding plan. But, this is a new opportunity for you to connect with your customers while growing your business.
Feel free to contact me at (616) 723-0444, or email email@example.com for answers to any questions you may have.