Here are some common Myths that result in people shying away from pursuing an online capital raise.
Debt vs. Equity
"Why would I want to raise money online for a rehab loan when I have funding sources such as private hard money lenders in my local market?"
This is a very fair question. This question often comes from a misunderstanding of what it actually means to raise capital for a fix and flip project online. Here are some common Myths that result in people shying away from pursuing an online capital raise.
Myth: "Raising money online is more work."
Any time you develop a new relationship with a funding source, whether it be a private or hard money lender, there is a certain amount of diligence that must be performed. This includes getting to know you, your experience level, a credit/background check, etc.
Certainly, any good crowdfunding portal is going to require the same. That said, once the crowdfunding company does their diligence and approves you, the second and third rehab loans are that much easier to get approved for.
Furthermore, you only go through this process once and then have the benefit of raising capital from hundreds if not thousands of individual investors that use the platform. In the long run this will be a reduction in work as you now have access to a much larger network of investors by going through the due diligence process once.
Myth: "Raising money online takes too much time - time I don't have for my quick turn-around projects.""
This is also a very real concern. At Fund That Flip, we pre-fund your deals so that you aren't kept wondering whether or not your project will get funded from the Crowd. Once you receive a term sheet from us, you can be sure the funds you need will be available for your closing date.
We then work with you to get the specifics of your project online so you get exposure to our large network of investors. As you perform well with our investors your network grows allowing you to feel comfortable in your ability to get the funding you need for future projects.
Myth: "I can't have all of my personal information displayed for the world to see!"
Privacy is a very big concern for us and we respect the fact that your credit, background and other personal information is sensitive. We do check these things and let our investors know that we've checked them but we never provide specific information about you personally. Further, you always retain final sign-off on what information is provided on the site.
Hopefully this helps demystify what it means to raise capital online. While there is certainly a learning curve, the benefits of developing online relationships with thousands of investors who want to help you complete your projects will pay dividends over-time.