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Earlier today, the SEC voted 3-to-1 on new rules for the crowdfunding industry, which are set to go into effect in 90 days following a comment period. These rules fall under Title III of the JOBS ACT and provide clearer guidance on what types of investors will be eligible to participate in deals going forward. The most notable update is that online platforms will be able to accept up to $1 million per year from the general (i.e. non-accredited) public.

Today’s ruling marks a positive step forward for the crowdfunding and marketplace lending industries. Essentially, anyone will be able to participate. Title III should cause more capital to flow into deals, opening an opportunity for small businesses and startups to raise more capital.

Here are some of the  details on the new rules:

  1. If your annual income and net worth are both less than $100,000, you’ll only be able to invest 5% of your annual net income or net worth in each 12-month period.
  2. If your annual income and net worth are above the $100,000 threshold, you will only be able to invest 10% of you annual net income or net worth in each 12-month period, but not to exceed $100,000.
  3. Offers must be made through a Broker-Dealer or Portal Intermediary

Debt vs. Equity Platforms

While the new rules open up opportunities for companies operating equity platforms, they could also signal a step forward for debt-focused ones. Equity deals are typically riskier and deserve the required disclosures of Title III. An equity position implies lower payment priority than debt in any capital structure, so those investors will be the last to recover principal in the event of a default or bankruptcy. Additionally, the cash flow investors receive from a debt investment is more predictable and based on a fixed income stream.


At PeerStreet, we are 100% focused on real estate debt, primarily offering first-lien positions through the platform. Loans are short-term, typically underwritten at an LTV of 75% or less and are secured by both residential and commercial properties. Currently, accredited investors are eligible to commit capital on the platform but once an investor meets those requirements, the minimum investment amount is just $1,000.

High-Quality Investments

PeerStreet’s primary goal is to level the playing field for all investors by providing more direct access to real estate loan investments that were previously unavailable to them. This asset class has traditionally been highly fractionalized and opaque, but delivers attractive risk-adjusted returns. We’ve taken lessons learned from recent market downturns to create a marketplace that offers high-quality investments in higher quantity than most investors have had open to them in the past.

It’s our view that if regulators can come together on an agreement that provides access for all types of investors to make online equity investments, they should also find a less onerous avenue for debt platforms to provide offerings to all investors, especially first-lien positions, which are the safest part of the capital stack.  

Now, the market will wait to see what happens during the 90-day comment period and, longer term, observe what impact these changes truly have on the industry. Bottom line, we’re encouraged by this progress.

Sources: Fortune, Forbes and The Wall Street Journal

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