Crowd Sourced Funding Equity Raising a Significant Financing Opportunity for Small Businesses and Medium-Sized Enterprises.
Prepared by Peter Towers, Managing Director Towers Business Development Pty Ltd and ESS BIZTOOLS.
Organising appropriate finance for their businesses is an ongoing concern to directors and managers of small and medium-sized companies. The recent amendments to the Corporations Act, which enables companies with turnovers under $25 million per annum to raise capital direct from the public, is a significant improvement in the financing of SMEs.
Eligible companies are able to raise up to $5 million in a 12-month period direct from the public and repeat this level of capital raising in future years if the market supports the company’s vision.
The amendments to the Corporations Act represent arguably the biggest improvement in 35 years for small and medium-sized companies relative to their financing arrangements.
The opportunity to utilise Crowd Sourced Funding Equity Raising is available to any type of company, irrespective of the age of the company.
Crowd Sourced Funding Equity Raising will be attractive to companies that are wanting to “scale up” their business operations because when companies grow they normally require “cash” to finance the larger investment that will be required in working capital items such as debtors, inventory, perhaps research and development and potentially capital expenditure for larger premises for the business.
The Australian Securities & Investments Commission (ASIC) has overall responsibility for supervising the Crowd Sourced Funding Equity Raising activities and following their advertisements for businesses with Australian Financial Services Licenses to apply for registration as a Crowd Sourced Funding Intermediary, has appointed 15 businesses to be Crowd Sourced Funding Intermediaries. These Intermediaries are located in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth.
The legislation specifies specific tasks that the Intermediaries are responsible for which, in the words of the former Treasurer and now Prime Minister, “the Intermediary is to act as the gatekeeper on behalf of ASIC“.
The Intermediary also acts as the “promoter” of companies that it has been appointed to act as the Intermediary for by alerting the thousands of potential investors that the Intermediary has attracted to their “potential investor register” about the latest company that the Intermediary has listed.
When the Intermediary completes their due diligence review on the Crowd Sourced Funding Offer Document the capital raising process, which has to be conducted from the Intermediary’s website, is ready to proceed.
At this stage 44 companies have raised $37.5 million from 31,141 investors - an average investment of $1,207 each.
Based on the experience in the United Kingdom, USA, Canada and New Zealand there is an expectation that the level of activity relating to Crowd Sourced Funding Equity Raising in Australia will significantly increase in 2020.
Companies in North Queensland that are interested in expanding their business operations, without having to borrow money, should invest some quality time in exploring the opportunities that Crowd Sourced Funding Equity Raising presents.
If you are interested in obtaining further information on how Crowd Sourced Funding Equity Raising operates, from a company’s point of view, investor’s point of view and the role that accountants can play in this new capital raising process for small companies, please don’t hesitate to contact us at:
Telephone - 4724 1118
If you would like to obtain a copy of the white paper which we have produced “Crowd Sourced Funding Equity Raising” please go to the Towers Business Development website popup.
Additional information can be obtained from our websites:
Towers Business Development - www.towersbusiness.com.au
ESS BIZTOOLS - www.essbiztools.com.au
ESS Small Business - www.esssmallbusiness.com.au