The Blue Hill Co-op in Blue Hill is the first business seeking to raise $1 million through the Fund-ME crowdfunding rule, which allows privately owned Maine businesses to solicit investments from small investors in the state.

Under the Fund-ME rule, which took effect in 2015, non-accredited state residents can invest up to $5,000 each in a privately owned business every 12 months. The rule applies only to businesses and investors located in Maine.

An accredited investor is one with a net worth of at least $1 million and annual income of at least $200,000 over the past two years. Before the Fund-ME rule’s approval, private companies in Maine could solicit investments only from accredited investors.

The food cooperative said it plans to use the $1 million to help fund construction of a new location that will triple its size. The co-op is more than 40 years old and has about 1,500 members.

“The Blue Hill Co-op is excited to be able to offer investment opportunities to all our Maine-resident owners using Fund-ME,” said Tom Reeves, the co-op’s relocation manager. “As a cooperative business, one of our core principles is owner economic participation. Fund-ME will allow our 1,500 owners to have the chance to help the co-op grow as a business, bettering the economy of the Blue Hill Peninsula.”

Blue Hill is offering 10,000 shares that will produce varying annual dividends depending on the investor’s length of commitment. At the maximum commitment of 10 years, the investor would receive an annual dividend of 4.5 percent and would be able to sell back the shares after 10 years.

For all investments, the price per share is $100.

The co-op said it expects to move into the new location by the end of 2018. As is the case with all solicitations for investments, Blue Hill noted that there are potential risk factors for investors. They include a possible decline in sales, worsening economic conditions, supply shortages and increased competition.

The co-op said it has experienced annual sales growth of 7 percent over the past three years, but that it did not expect growth to continue indefinitely at that rate. Investor information is available at the co-op’s website, bluehill.coop.

Since Jan. 1, 2015, companies in Maine have had the ability to apply to the state Office of Securities for approval to raise up to $1 million by selling shares through the practice known as equity or investment crowdfunding. The program was widely touted by the state’s entrepreneurial community at the time.

However, Blue Hill is the first company to actually use the investment method, more than 18 months after it was approved.

Equity crowdfunding advocates have said the primary reason for the lack of participation is probably the amount of paperwork required. The process involves lengthy disclosures, as well as a detailed business plan and audited financials.

The Maine Office of Securities expects more Maine entrepreneurs and companies to follow in Blue Hill’s footsteps by making use of the Fund-ME program, said office spokesman Doug Dunbar.

Maine Securities Administrator Judith Shaw noted that Maine’s crowdfunding rule does not preclude businesses from raising money from investors outside of Maine. However, those investors still must comply with their own states’ equity crowdfunding rules.

“Blue Hill Co-op is just the type of small business seeking to grow that Fund-ME is intended to assist,” Shaw said. “Fund-ME provides Maine’s small businesses a new tool to raise capital, and uses the basic concept of social funding to allow everyday investors to participate directly in the development of a Maine business.”

J. Craig Anderson can be contacted at 791-6390 or at:

canderson@pressherald.com

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