Investing in a small business is a terrific way to supplement a diversified portfolio of stocks. For years, individual investors often didn’t have the opportunity to invest in brick-and-mortar businesses.
Thanks to crowdfunding, that is no longer the case. If you want to invest in a private business, our Mainvest review shares how you can do it with minimal resources.
What is Mainvest?
Mainvest is a crowdfunding platform that connects small businesses with people who are looking for alternative investments.
The company was founded in 2018 and lets non-accredited investors get started with a minimum investment of $100.
Like real estate crowdfunding sites, the company vets all potential businesses to ensure they are a fit for the platform.
How Does Mainvest Work?
The philosophy behind Mainvest is simple. It connects small local businesses with investors.
Not all organizations are eligible to be on the platform. Every small business must complete a funding application.
Upon submission, Mainvest evaluates the company to see if it’s suitable to be on the platform. If it passes the vetting process, it goes on the site and is open to people looking for investment opportunities.
The investment comes in the form of revenue-sharing notes. As an investor, you receive quarterly distributions that represent a portion of the company’s revenue.
Additionally, the business repays your complete investment by an agreed-upon maturity date.
If you regularly invest in stocks, you might be used to seeing returns stated on an annual basis. With small business crowdfunding, the return is quoted as an internal rate of return (IRR).
Mainvest states that returns on the platform range from ten to 25 percent.
How Does the Company Choose Businesses?
Mainvest is transparent with how they choose a small business. Typically, these aren’t companies that receive significant investments from Wall Street or venture capitalists.
Instead, they are brick-and-mortar businesses, like a brewery or health food store, that need funds to open for business. They typically need $500,000 or less to start operating.
Under Regulation Crowdfunding, the most funding a company can receive is $5,000,000.
Mainvest is thorough in its vetting process of each business. Here is what the platform looks for when it completes its due diligence:
- Anti-fraud vetting to ensure the business clears regulation standards and is competent to oversee investor funding
- Responsibility check to look for any red flags from the business owner
- Bad actor check (BAC) through performing a limited background check
- Yellow Flag BAC that reviews any encounters with law enforcement, on a case-by-case basis
In addition, Mainvest performs a continuous review of all listed businesses to protect against fraud. They make all of this information available to potential and current investors.
The site lists a very small portion of all the businesses that apply for funding, further showing how seriously they take the due diligence process.
Who Can Open a Mainvest Account?
Opening an account with Mainvest is simple. You need to be at least 18 years old and have access to a bank account.
It takes roughly ten minutes to open an account and complete an investing questionnaire.
You don’t need to be an accredited investor to open an account. Until recently, you often needed to have a high net worth to invest in local small businesses.
With Mainvest, you can open an account with as little as $100 and start creating passive income.
However, the most you can invest is $2,000, five percent of your annual income, or five percent of your net worth, whichever is greater. This ensures you are in compliance with SEC regulations if your net worth is under $107,000.
If your net worth is over $107,000, you can invest ten percent of your annual income or net worth, whichever is greater.
You can open both a standard taxable and self-directed retirement account.
The one drawback is that IRAs must be established through a third-party account. This will allow an advisor to help you choose and fund individual investments.
What Can I Expect to Earn with Mainvest?
Mainvest uses an IRR to quote earnings. The site quotes multiples you can earn, and each small business has a different multiple.
For example, you will see 1.3X, 1.4X, and 1.5X listed next to opportunities as investment returns.
If you choose an investment that pays 1.4X and you fund it with $1,000, you should anticipate a return of $1,400 by the maturity date.
This is in addition to the quarterly distributions you receive on the investment.
Unlike stocks, your investments are illiquid. There is no secondary market to resell the investment.
If your investment strategy is short-term, you may want to search for other opportunities since most investments on Mainvest last at least five years.
However, if you’re a long-term investor, the platform can be a good way to earn passive income.
There is no cost to invest in businesses and startups through Mainvest. The site does charge a six percent fee to firms looking to raise financial support through its platform.
If the business is unable to raise sufficient funds to open, all of your funds will be returned to your account so you can pursue another opportunity.
Features of a Mainvest Account
If you want to help small businesses by investing in them, Mainvest is a fantastic way to do it.
Here are a few of the features the platform offers to further your investment goals.
Numerous Investment Options
In the past, you needed lots of cash to invest in small businesses. Mainvest democratizes that significantly by allowing anyone to start investing with just $100.
One key feature the platform has is diversity. Here are a few of the investment opportunities you can find:
- Community centers
- Food trucks
- Health or wellness stores
- Movie theaters
Businesses can be nationwide, and the site regularly vets new opportunities.
Like other investment platforms, Mainvest offers tons of educational and resource tools for new investors. All businesses seeking funding must file with the SEC.
The platform makes all of those filings available to view. Whether you’re a novice or seasoned investor, you’ll want to analyze the filings to ensure you’re comfortable with the opportunity.
Additional research tools include business plans, press releases, forecasts, and anything else a company has made public.
You can search these documents on the platform.
Along with a quarterly disbursement, the platform also creates an analysis for each investment on the site.
As with any investment, it’s essential to monitor the reports. Although illiquid, you want to know where each investment stands.
Customized Portfolio Choices
Investing with Mainvest is self-directed. You get to diversify your portfolio with what suits your needs.
Since the platform actively vets opportunities and publishes its research, you can confidently construct a small portfolio to reach your goals.
Like stocks, you usually don’t want to put all your money into one industry. Creating a portfolio of different types of small businesses is the best way to protect against wild swings.
Pros and Cons
Choosing a new investment requires due diligence. Here’s what to keep in mind about the Mainvest crowdfunding platform.
- Can invest with as little as $100
- No investment fees
- Quarterly distributions
- Accepts non-accredited investors
- Loads of data to make investing decisions
- Easy to use platform
- Investments are illiquid
- Has only been operating for a few years
- Carries risk
If you want to invest in small businesses, Mainvest is worth considering.
Is Mainvest Safe?
Yes, the Mainvest platform is safe. It uses bank-level security.
However, investing in brick-and-mortar businesses carries inherent risk.
According to the Mainvest site, small businesses have limited resources. Plus, some are unable to borrow funds from a bank. This risk is passed onto you as an investor.
Nevertheless, all investments carry risk. Do your research before selecting a business to ease any fears.
Can You Lose Money on Mainvest?
Any investment can potentially lose money, and Mainvest is no different. If the small business you invest in defaults, you will lose your original investment.
As a rule of thumb, you should only invest what you’re comfortable losing.
Additionally, it might be best to view your investment as a small part of your overall investment portfolio.
Can I Get My Money Back from Mainvest?
According to the Mainvest site, it is possible to cancel an investment. But, this cancellation must be done 48 hours before the offering deadline.
Until then, your funds are sitting in escrow. If you choose to cancel within the allowed window, your money will go back to your escrow account.
It’s also wise to read the offering prospectus to learn the cancellation terms for a given business.
Alternatives to Mainvest
While Mainvest is a reputable crowdfunding site, you may find that it’s not for you.
|Site||Min. Investment||Fees||Best For||Try|
|Mainvest||$100||$0||Invest in small business|
Here are some alternatives with longer histories that let you take advantage of crowdfunded investing.
Fundrise is one of the top real estate crowdfunding platforms. The site launched in 2012 and is an excellent way to invest in real estate.
With Fundrise, you can invest in commercial and residential real estate. They vet and manage all of the properties.
Since most properties have multiple tenants, it tends to spread your risk more evenly.
You can open an account and start investing with as little as $10.
Read our review of Fundrise here to learn more.
Diversyfund is another excellent alternative to invest in real estate via crowdfunding. The company has been in business since 2014.
While Mainvest has a broad array of investment options, Diversyfund focuses largely on residential apartment buildings.
They analyze and manage all the properties, allowing you to create residual income via dividends.
You can open an account and start investing with as little as $500.
Groundfloor is a good choice if you want to invest in debt or equity properties. The company has been around since 2013.
Think of Groundfloor as what LendingClub is to peer-to-peer lending. You loan funds to people who actively fix and flip properties.
Groundfloor offers a shortened holding period vs. other crowdfunding platforms. The holding time of an investment is months instead of years.
You can open an account and start investing with as little as $10.
Read our analysis of Diversyfund and Groundfloor here to learn more.
Pricing and Fees
Ease of Use
Mainvest is an easy-to-use crowdfunded platform that lets people invest in small businesses with as little as $100.
✔️ Invest in small businesses with just $100
✔️ Ability to earn quarterly dividends
✔️ Allows non-accredited investors
✔️ Lots of research tools to identify investments
✔️ Easy-to-use platform
❌ Very illiquid
❌ Has a short track record
❌ Investing in small business carries risk
Small businesses are vital to the economy. They often need funding to get started and eventually reach success.
Mainvest is a good option to invest in those businesses while diversifying your portfolio and increasing your net worth. If you are looking for an alternative investment opportunity, it’s worth considering.
What do you look for in an alternative investment opportunity?