If you're new to the world of equity crowdfunding, we've compiled a list of the top five most frequently asked questions we get asked about investing.
1. How does equity crowdfunding work?
You can invest from just £10 and you can become a shareholder in a company. The amount you invest, and the equity issued by the company, is what determines your percentage of ownership. This is a great way to support businesses that you are interested in, follow or have a personal connection to, as you can say that you own a share of that company.
Businesses offer either B shares with no pre-emption rights or vote in future business plans, or, if you invest above a certain threshold, A Shares with voting rights. You will be sent a share certificate and appear on the share register at Companies House. The main way to make a return on your investment is by selling your shares for more than you paid. There is no active secondary market for these shares on Crowdcube, so you cannot sell them immediately. If the business grows to float on a stock market, is bought by a larger company, or the company buys back equity from investors, you are likely to be able to sell your shares. However, please note that none of these are guaranteed and that your capital is at risk.
2. How do I become a member on Crowdcube?
Joining Crowdcube is free, quick and there is no obligation to invest. To become a member click on the 'join' button in the top right-hand corner of the homepage, where you can register with your email address or LinkedIn profile. You'll then need to select what type of investor you are, but don't worry, it takes less than 30 seconds and there are descriptions for each investor type to help you decide.
3. How can I invest?
To invest you will firstly need to register as a member, as outlined above. Once you have found a pitch you like, state the amount you wish to invest in the 'Enter Amount' box, then click 'Invest now' and enter your payment details.
Payment is only taken once the pitch hits its target, and after the completion of legal documentation, which we handle. If the pitch does not reach its target, no money is taken. You will be notified by Crowdcube in both circumstances.
4. What happens once the target amount is reached?
Once a pitch has funded and has closed to further investment, you will receive a cooling off email, which includes a copy of the company’s Articles of Association for you to review.
During this cooling off period, which is generally no shorter than seven days, you’ll have the opportunity to review your investment before it becomes final. Once this cooling off period has expired, we’ll send you an email confirming when your payment, which includes your investment and Crowdcube’s investment fee, will be collected.
We can accept payment via Visa and Mastercard debit cards as recognised by our third party payment provider Stripe. Unfortunately, we cannot accept payment via credit card, cheque or direct transfer. We will also run you through our anti-money laundering check, an identity assessment ensuring all investors are who they claim to be. We are required to make these checks as per our regulation by the Financial Conduct Authority (FCA). Don't worry, the anti-laundering checks are secure and have no effect on any credit scores.
We will email asking for one document to confirm your identity and one to confirm your address and provide you with information on which documents we can accept. Unfortunately, if we cannot verify your identity we will be unable to process your investment, and it may be cancelled.
5. What is SEIS and EIS?
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are government schemes designed to help smaller higher-risk trading companies raise finance by offering tax relief to those who buy shares in the company. Businesses listed as 'SEIS' or ‘EIS’ indicate that tax relief will be available to qualifying investors. Businesses listed as 'SEIS or EIS Pending' have verbal confirmation of their qualification for the schemes but have yet to receive written confirmation.
The availability of tax relief, including EIS and SEIS, depends on the individual circumstances of each investor and the company concerned and may be subject to change in the future. If you have any questions regarding the availability of tax relief you should seek independent tax advice before investing, as Crowdcube cannot offer this.
If you would like to get started and make an investment in a live pitch, visit the latest opportunities today.