SBDC e-news – February 2018
With a range of non-traditional banking alternatives coming on stream, small business owners are making the most of these opportunities to fund their business development and growth with less risk. Debtor finance, crowdfunding and crowd-sourced equity funding (CSEF) are rapidly gaining popularity, particularly amongst small business start-ups.
To access CSEF, businesses need annual turnover and gross assets of up to $25 million. The scheme works in a way similar to listing a business on the stock exchange, but with lower costs. There’s a fair bit of preparation required before signing into a CSEF arrangement but businesses can raise up to $5 million a year. Individuals seeking to invest can contribute up to $10,000 per company, per year.
Legislation covering CSEF was introduced to Australia in September 2017 effectively removing the competitive advantage previously available only to international businesses. (CSEF schemes have been available in the UK and New Zealand for several years.)
Although CSEF is a form of ‘crowdfunding’, there are significant differences between it and basic crowdfunding. Both systems operate through a third party platform and are based on funding provided by members of the public, however, a primary difference is the expected return on investment.
Crowdfunding investors are often happy with a progress report and a sample of the product while CSEF investors become shareholders in the business and would be expecting a financial return on their investment. Basically, they’re buying into the business.
The Australian Securities and Investments Commission (ASIC) has now issued one of Australia’s first retail equity crowdfunding licences to online retail equity crowdfunding platform Equitise.
The Corporations Amendment (Crowd-sourced Funding) Act 2017 came into effect on 29 September 2017. Is CSEF right for you ?