1. Who can raise capital through SparkMarket?
Any LLC or C-corporation that is organized and operating in our area of current operation (currently Georgia or Tennessee) that passes certain regulatory eligibility criteria. Our deal term calculator, which can be accessed for no charge, helps businesses determine their eligibility.
2. What type of offerings can SparkMarket support?
Our tools support debt, convertible debt and equity offerings. Please get in touch if you have a need for further customization and we can discuss our capacity to assist.
3. How much money can my business raise using SparkMarket’s tools?
Georgia-based businesses can raise up to $5 million from Georgia residents (both accredited and non-accredited). Tennessee residents can raise up to $1 million from Tennessee residents.
4. For a debt offering, what length (term) of loan can I choose to create?
Businesses can set their own loan terms between 6-36 months.
5. For a debt offering, what are my repayment options?
Businesses can choose to make repayments on their loan on a monthly basis. All payments must be of principal and interest.
6. How does my business pay investors/lenders back?
For debt offerings, a payment schedule is determined in advance, and your business will pay the same amount at each payment interval during the term of the loan. At the maturity date, the business is required to pay the unpaid balance to lenders (including accrued interest). If the business has selected a “Spark” for its loan, the bonus return must be added to the unpaid balance at maturity.
For an equity offering, investors do not get “paid back” in the traditional sense. Rather, they purchase an ownership stake in the business company that entitles them to certain benefits of ownership, which may include voting rights and distributions of profit.
For a convertible debt offering, backers either get repaid (typically a lump sum at the maturity date) or their interest converts to equity at a valuation established at the time of conversion.
7. Do I have to provide a personal guaranty?
No, but you have the option to do so. SparkMarket enables you to set your own loan terms, including the option of personally guaranteeing the repayment of the loan, to test the most advantageous terms attractive to your network. In this way, a business can test the crowd and beat the terms of any bank loan.
8. Who can invest in (or loan to) my campaign?
The only backers eligible to invest in (or loan to) campaigns that use SparkMarket’s technology are persons who are legal residents of the State in which the business is formed and operating. Backers are required to certify as to their residency status. Currently, SparkMarket is only serving businesses in Georgia and Tennessee, but may expand to other States as state and federal securities laws permit.
9. Can I set a minimum or maximum investment (or loan) amount for Backers?
Yes. You can set a minimum investment (or loan) amount as low as $100 and a maximum amount of up to $10,000. Backers who qualify as “accredited investors” are not subject to any maximum investment amount (although businesses can set a universal maximum, if they wish).
10. Does my campaign have to have a minimum to close?
Not by law, but we require all businesses to set a commitment minimum, and the business may not move to close a Campaign until the commitment minimum is reached. With that said, a business may keep all funds submitted by backers during the closing process even if actual funds submitted drop below the identified campaign minimum.
11. Are there regulatory filings that are required?
There are no federal regulatory filings that are required for campaigns that are run using SparkMarket’s intrastate tools. However, there are State based regulatory filings which must be completed before a campaign can launch. SparkMarket’s tools assist businesses in constructing and submitting these filings.
12. How long can my campaign run?
SparkMarket’s tools can be used to run a campaign for up to 180 days. After 90 days, a business must pay a listing fee of $50 a month.
13. Does SparkMarket promote my campaign or drive traffic to my site?
No. SparkMarket is not a registered broker/dealer or investment adviser, and does not solicit purchasers of securities or recommend securities in any transactions. Further, SparkMarket is not a crowdfunding portal or registered intermediary that hosts transactions that are generally viewable to the public in a centralized place. Rather, we provide simple technology solutions and know-how to effectively build, manage, execute and close your own intrastate capital raise campaign from your own networks (customers, friends and family). Research has shown that, of the funds raised in the vast majority of successful investment crowdfunding campaigns, only 6% originated from backers outside the business’ network.
14. Are there restrictions on how I can promote my campaign?
Yes, but the restrictions are significantly less burdensome than other methods for raising capital. You can advertise your offering to the general public using basically any methodology you wish (e-mail, social media, posters, radio, flyers, orally, events, etc…), as long as your message communicates that the offering is restricted to legal residents of your State.
SparkMarket’s technology tools provide safeguards to qualify backers’ eligibility to participate in your offering, and SparkMarket offers consulting on compliance when using various offering methods. However, businesses are themselves always responsible for all legal compliance, and SparkMarket is not the legal representative of any business or backer. Businesses are urged to consult their own independent legal counsel for all questions regarding securities laws compliance.
15. What happens when my campaign goes live?
When your campaign is active, potential backers can commit to support your campaign through the campaign page. However, these operate as commitments only, and backers do not pay any subscription funds until the closing process. Once a campaign has reached its minimum level of commitments, the business may move to close the campaign to further commitments and begin collecting subscription funds. Once this happens, SparkMarket will contact the committed backers with instructions as to how they can submit their subscription payment and receive their legal documentation.
16. How much does it cost to raise capital using SparkMarket’s technology?
Unlike broker/dealers, many crowdfunding platforms and certain other intermediaries in the capital raising space, SparkMarket does not take any transaction-based commission. That means that we are a subscription and service fee based provider, and the cost to run your campaign, although payable in stages, is not dependent on the size or success of your campaign.
We charge fees at two stages of your campaign:
- Campaign Launch Fee – $500 (reduced to $199 for Early Access participants). You can design, modify and prepare your campaign using our technology tools for free. Once you choose to publish your campaign for investment, you will be charged a non-refundable Campaign Launch Fee of $500 (reduced to $199 for Early Access participants).
- Closing Fee – $2,500. At any time after your campaign has successfully reached its minimum level of commitments, you can choose to close the campaign. At such time, you will be charged a Closing Fee of $2,500.
We also offer a variety of special consulting services at SparkMarket, including intrastate offering compliance, Regulation A+ and Regulation D compliance, private placement consultation and investor relations best practices. These services are provided upon request for a special fee. Contact us for more information.
17. How does Closing a campaign Work?
After you move to close your Campaign and submit the required payment, SparkMarket will produce closing documents for your review, and coordinate with committed backers for signature and payment of subscription funds. Once subscription funds have been received, our third-party escrow provider will break escrow on the campaign, and will release subscription funds to the business less any escrow fees.
18. What other resources does SparkMarket provide to businesses?
We are available to hold pre-scheduled one-on-one consultations with any businesses who are interested in running an intrastate capital raise, and are pleased to discuss any questions which arise during the process of your campaign build.
We can also provide general advice with respect to constructing and marketing an effective campaign and have referral resources for businesses to utilize in connection with their campaigns.
19. Is support/help provided following completion of a campaign?
SparkMarket facilitates debt servicing at the close of a successful debt campaign. Businesses otherwise have the responsibility to communicate with their investors and follow their legal obligations following completion of a Campaign, including to fulfill payment and tax reporting obligations (such as obtaining Form W-9s from and issuing Form 1099s and/or K-1’s to investors).