As the global pandemic continues to unfold, small businesses are moving quickly to adapt to the new normal, working to maintain pace in their growth, stay in front of customers and be as responsive as possible to the current environment.
While there are relief opportunities available, businesses with a long-term vision will be looking to strategically raise capital. Similarly, many consumers are seeking unique ways to support their favorite small businesses and community merchants. Self-directed IRA (SDIRA) account holders have the opportunity to use their retirement savings to invest in crowdfunding campaigns that support small businesses.
What is crowdfunding?
Crowdfunding is a fundraising concept that invites a large pool of investors to give smaller contribution amounts to support a new business venture. Campaigns touch every sector and type of business. Prior to the COVID-era, crowdfunding was an increasingly popular option for entrepreneurs looking to raise capital for their businesses. Over $17 billion is generated via crowdfunding campaigns each year (source), and investors who use self-directed IRAs as a savings vehicle have the opportunity to access the unique and coveted crowdfunding space.
Using a SDIRA for crowdfunding opportunities
Investing in businesses via crowdfunding is appealing for both consumers and business owners. Here’s what SDIRA account holders need to know:
1. The process is easy. Investing through a self-directed IRA is a simple and relatively inexpensive process, and firms like STRATA Trust Company can make it an easy and seamless process for investors.
2. It helps diversify holdings. Your retirement funds are not limited to just publicly traded stocks, bonds, and mutual funds. You can invest your SDIRA in alternative investments, like direct real estate, private hedge funds, private equity – or in small businesses you believe in through crowdfunding.
3. Putting savings to work in a new way. You can capture some of the gains you’ve realized in the last 8 to 10 years and deploy those funds into investments that are not tied to the market. This is especially important in today’s environment.
Using a self-directed IRA for crowdfunding projects presents a unique opportunity for investors to get involved with new projects and business endeavors. Likewise, it presents a unique opportunity for entrepreneurs to expand their pool of investors.
Using a SDIRA is a unique strategy to access crowdfunding opportunities and investors who are considering this option should fully understand the components of the investment. Feel free to contact us to learn more at [email protected].
Disclaimer: The information provided herein does not, and is not intended to, constitute personalized financial or legal advice. The contents of the article are for general informational purposes only and should not be relied or acted upon without specific professional legal or financial advice, based upon an individual’s situation.