July 16, 2015
Crowdfunding is becoming a widely favored alternative to raising capital rather than seeking loans from banks, particularly in the real estate sector. Historically, developers and operators were not permitted to solicit funding for projects due to restrictions by the Securities and Exchange Commission (SEC), and as a result real estate developers were limited to real estate investment trust (REITs) and private equity investors associated with the development company.
Borrowers are now able to market requests for funding and seek loans from multiple investors, due to the Jumpstart Our Business Startups Act (JOBS Act). When individual investors pool their funds, borrowers are able to bypass the middleman, in this case, banks, and broaden their accessibility to loans from issuers or sponsors.