Investors Frequently Asked Questions
After the enactment of the Jumpstart Our Business Startups Act of 2012, the SEC was tasked with adopting rules to facilitate capital raising by small businesses while providing significant investor protections. Regulation Crowdfunding or Regulation CF enables individuals to purchase securities in crowdfunding offerings subject to certain limits, requires companies to disclose certain information about their business and securities offering, and creates a regulatory framework for the intermediaries facilitating crowdfunding transactions.
For each Loan, an escrow account will be set up to hold funds during the bidding process. This escrow account will be closed at the end of bidding with funds transferred either to the Company or returned to investors.
You must be 18 years or older and you will be subject to the rolling twelve month investment limitations of Regulation CF.
Any securities issued in an offering conducted under Regulation Crowdfunding are subject to a one-year restriction on transfer, unless such transfer is made: (i) to the issuer of the securities; (ii) to an accredited investor; (iii) as part of a registered offering; or (iv) to a family member of the purchaser or certain trusts. The promissory notes issued by companies using our funding portal may contain additional restrictions on transfer. Investments on Funding Wonder should be viewed as illiquid investments meaning you cannot sell the securities quickly and there may be no market for the investments when you are able to resell.
You are subject to certain limitations to balance the risk that typically comes along with small business lending. Specifically, SEC regulations limit the amount individual investors may invest across securities offered under Regulation CF over a trailing 12-month period. The limitations are as follows:
If the investor’s annual income or net worth is less than $100,000, then an investor may invest the greater of:
- $2,000 across all securities offered under Regulation CF over the trailing 12-month period and
- 5% of the lesser of their annual income or net worth across all securities offered under Regulation CF over the trailing 12-month period.
If the investor’s annual income and net worth are at least $100,000, then an investor may invest the lesser of:
- 10% of their annual income across all securities offered under Regulation CF over the trailing 12-month period and
- 10% of their net worth across all securities offered under Regulation CF over the trailing 12-month period.
Furthermore, for any 12-month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.
The table below, which was provided by the SEC, provides examples of an individual investor’s aggregate investment limits in any 12-month period.
|Investor Annual Income||Investor Net Worth||Calculation||Investment Limit|
|$30,000||$105,000||Greater of $2,200 or 5% of $30,000 ($1,500)||$2,200|
|$150,000||$80,000||Greater of $2,200 or 5% of $80,000 ($4,000)||$4,000|
|$150,000||$107,000||10% of $107,000 ($10,700)||$10,700|
|$200,000||$900,000||10% of $200,000 ($20,000)||$20,000|
|$1,200,000||$2,000,000||10% of $1,200,000 ($120,000), subject to cap||$107,000|
Investors bid an interest rate on a loan they are interested in and the lowest interest rates prevail. If the loan is filled by bids with interest rates below yours, your bid will not be included in the loan and your funds will be returned from escrow. If multiple investors bid the same interest rate, the earliest bids are accepted first until the target amount is reached; any bids that are not accepted will be returned to you.
Upon making a bid, the money you bid will be transferred from your personal or company account via ACH to an escrow account at an FDIC-insured bank. Your funds stay in the escrow account until the auction is over and the funds get transferred from the escrow account either to the Issuer or back to you in the event of an unsuccessful financing. Funding Wonder will send you a confirmation email that your money has been deposited in the escrow account. This information is also posted on your investor dashboard.
A business loan is considered in “Default” when the borrower has failed to make payments for 121 or more days. The loan becomes “Charged Off” when there is no longer a reasonable expectation of further payments. Charge off occurs no later than when a loan is 160 days past due or 30 days after the default status is reached.
Funding Wonder will not pursue repayment of a loan once it has been declared charged off. Investors will no longer receive principal and interest payments. Investors may seek to recover remaining principal investment and past due interest from the borrower directly.
The Form C is a document the borrowing company must file with the Securities and Exchange Commission (“SEC”) which includes basic information about the company and its offering and is a condition to making a Regulation CF offering available to investors. It is important to note that the SEC does not review the Form C, and therefore is not recommending and/or approving any of the securities being offered. Investors should read the borrowing company’s entire Form C before making an investment.
All offerings are open to the public to view. You need to open an account and provide information about yourself if you want to invest in a particular offering or participate in the online forum for communication among investors or with the company. Pursuant to Regulation Crowdfunding, all communications between or among the company and investors regarding the notes offered must be on our site.
An account with Funding Wonder enables you to manage and stay informed about your investments and to communicate with issuers and other investors. You do not need to transfer money to open an account. Your money can stay in your personal or company bank account and then you can transfer funds to an escrow account if you make a bid.
Your money will be returned to your account. It could take up to a week for the refund to be processed.
At the end of a bidding process, the system will calculate which offers have been accepted and which need to be returned. If your bid is rejected, you will receive an email that informs you that your bid was not accepted. This information will also be posted on your investor dashboard. The money will be transferred via ACH from the escrow account back to your account at the bank it originated from. This will include the $5.00 Investor Fee.
When a business Issuer’s payment is late beyond a 15-day grace period, a Late Payment Fee is assessed on the 16th day to compensate investors for the delay. The amount of a Late Payment Fee is the greater of 4.00% of the unpaid installment amount, or $10. This fee may be charged only once per late payment.
Funding Wonder will notify you via email that there has been a late payment. The Late Payment Fee will be prorated and then passed back to you in the next payment cycle.
Your investment principal will be reimbursed sooner but your total interest earnings will be reduced.
Funding Wonder will inform you via email and on your investor dashboard that an issuer has paid off its loan. You will receive a second notification via email once the transfer of your principal to your personal or company account has been initiated. This amount will be posted on your investor dashboard as pending until it is transferred.
Yes. You are only obligated to fund if the business hits its goal and your bid is included.
If your bid is accepted, your funds will be released from escrow to the business Issuer and you will receive a promissory note. Pursuant to the note, you will be entitled to a monthly payment for the duration of the loan period directly to the bank account registered in your profile. It will be based on the amount and interest rate you successfully bid (principal + interest). Each Investor’s note will set forth the interest rate he or she set.
The Issuer will direct payments of interest via ACH from its account to your designated bank account. You will be notified via email when money is transferred and you will also be able to view the status of your investment on your investor dashboard.
Each application must meet preliminary business requirements set by Funding Wonder as well as legal requirements under Regulation Crowdfunding. Funding Wonder also completes a comprehensive standardized risk assessment of every proposed offering. Based on this risk assessment, Funding Wonder considers the company’s historical financial performance, credit history (which sometimes includes personal credit histories of company officers), industry experience of key personnel, and certain indicators of the risk of the industry in which the company operates. Based on this risk assessment, Funding Wonder sets the range of investment terms available for the auction.
Funding Wonder’s risk assessments are not a guarantee of success. Investing in loans to small businesses is very risky, highly speculative, and should not be made by anyone who cannot afford to lose their entire investment. Before making an investment decision, Investors should review the company’s Form C for a complete description of its business and offering information as well as the comments and responses to questions posted on the discussion page for the offering. Each investor is ultimately responsible for conducting their own independent review of company documentation and perform their own independent due diligence.
While your funds are still in the escrow account, and if the bidding round has not been closed, you can cancel your investment commitment for any reason up to 48 hours before the offering period closes. Your investment cannot be canceled beginning 48 hours before the bidding round closes.
You will need to access your investor dashboard to cancel your bid. After you enter a cancellation, the system will immediately cancel your bid. After cancellation, you will be notified via email and on the investor dashboard that your bid has been cancelled. If you cancel immediately after you bid, the money will not be transferred to the escrow account. If you cancel your bid after the money has been transferred from your bank account to the escrow account, you will have to wait until the end of the auction to receive your refund.
For our initial pre-approval process that will allow you to make investments on our site, you will need the following information readily available:
- Personal information such as your current address and phone number
- Employment and employer information
- Net worth and income information
- Social Security Number or government-issued identification
- ABA bank routing number and checking account number (typically found on a personal check or bank statement). If you do not already have a U.S. bank account, please [email us] for further instruction.
Once you are pre-approved, you must complete a full user profile to be eligible for final approval to make investments. We provide an appeal process for individuals who are not approved.
Each campaign has a specific duration in the Loan Exchange. It is generally up to the business owner. It will usually range from three weeks to a couple of months. Please review the offering documents for more information.
Companies pay a one-time Posting Fee for a new listing and a Subscription Fee once the company successfully borrows from investors pursuant to the promissory notes. The detailed fee schedule can be viewed in the Business Owners FAQ under Fees and Charges.
You will be charged $5 for each investment you make to offset transaction related costs such as compliance checks and money transfer fees.
Review the different projects you might be interested in, read the Form C disclosure document about the business, investment and related risks. If you want to invest, simply click on “Invest Now” on the business profile page to start the process.
- State the amount you want to invest
- Indicate an interest rate you are willing to accept
Funding Wonder will send you a notification via email and post on your investor dashboard the information you will need to initiate your ACH money transfer from your personal or company account to the escrow account. You will receive a confirmation email once your money is deposited into the escrow account.
Under Regulation CF, the company must issue an annual report once a year with financial statements and a discussion of its business, no later than 3 months after the end of their fiscal year; however, there are some limited exceptions. Funding Wonder cannot assure that the company will file their annual reports, and the only penalty is that the company may not use Regulation CF again until they do so.