BBB: Consumers Be Cautious Of Crowd Funding
ST. LOUIS, MO. (KPLR) – It’s a new day for people trying to finance a business or creative project. The latest trend in investing relies on the internet and social media.
It’s called crowdfunding. That’s appropriate because, you get a “crowd” of people to help you build your dream business or project. They can be total strangers who want to help you make your ideas come to life. So if you`re searching for an investment opportunity it could be a mouse click away.
Crowdfunding websites require a project or business obtain a set amount of money through pledges. That goal must be met before the project can start. Ordinary people pledge what they can afford. It could be $5 or $5,000 for a new restaurant or an art exhibit or a new film.
But consumers should keep in mind it’s not your traditional investment tool, one that offers you ownership interest in the business. Chris Thetford of the Better Business Bureau encourages you to ask questions about what you get in return.
‘What people need to understand is it`s not like investing in a company. It`s not like getting an ownership interest in a company where you`re going to get returns on your investment. And while that may open up in the future, the Security and Exchange Commission is just not putting forth rules and regulations to allow that sort of funding to go into place where people can do this. And still get an equity interest in a company. Those rules have not been promulgated yet.’
The BBB tells us some of the sites have been known to operate out of someone’s basement.
Others have actually been set up by established businesses. Bottom line, consumers should do their homework before investing. If you have a consumer issue call us. The toll free number is 800 782-2222.