Federal Government supports CrowdFunding for Start-ups
The Abbott government has recently approved the National Industry Investment & Competitiveness Agenda, which in part supports the use of CrowdFunding and CrowdSourcing to enable start-ups and small businesses to access alternative finance and funding methodologies to source equity funding for their enterprises.
This decision is a follow-on from the earlier recommendations of the now disbanded Corporations and Markets Advisory Committee that had previously recommended that the government should implement enabling legislation to facilitate the use of CrowdFunding, as it would enable start-ups to raise capital and access new forms of funding, which would in turn, boost job creation and the broader economy.
It would also bring Australian legislation in line with CrowdFunding and equity raising legislation that has been successfully introduced in the USA, New Zealand, Canada and the UK, to support start-up enterprises which are driving the economies in these countries.
So what is meant by the term CrowdFundng
CrowdFunding is a method of peer-to-peer financing which can help start-up enterprises and established smaller businesses access fast and simple finance for business loans or start-up equity, by raising funds from the online community and by connecting with a number of independent investors via the Internet in a peer-to-peer relationship.
Start-ups and small businesses are introduced to potential investors directly through an open marketplace based on certain investment matching criteria and algorithms and thereby bypass the complexity and costs of middlemen and the banking world.
How does CrowdFunding differ from Start-up Funding
Start-up funding uses the same method of CrowdFunding but is specifically focussed on the raising or sourcing of seed or establishment capital for early stage equity investment in innovative start-up enterprises, especially in the technology sector. The start-up funds are raised in a similar fashion from the online community of independent investors in a peer-to-peer relationship.
Investors are introduced to potential start-ups through a marketplace based on certain investment matching criteria and algorithms. This type of equity investment is called risk capital because both the risk of loss and the potential for profit may be considerable.
Some background on the emergence of CrowdFunding.
Since the Global Financial Crisis in 2008, the traditional banking system had been hurt by the high underwriting and servicing costs associated with lending to small businesses. Consequently it has created an opportunity for non-traditional lenders through a process called peer-to-peer marketplaces to cater to the growing demand for alternative business financing options by directly connecting borrowers and investors.
Peer-to-peer (P2P) lending lets investors lend directly to individuals or businesses and uses low-cost online platforms to cut out the banks and other financial institutions.
The San Francisco based LendingClub, is one of the USA’s largest players in the online peer-to-peer Crowd funding marketplace, has facilitated more than US$5 billion in loans since its launch in 2007.
This shift to peer-to-peer (P2P) lending is not unique to the USA. In Britain for example, some peer-to-peer (P2P) networks are offering “mini-bonds” by lumping together lots of small, unsecured loans from retail investors such as superannuation funds, and lending them to established businesses in the form of debt funding. The major UK P2P networks providing these investment options include, Funding Circle, Zopa and RebuildingSociety.
Peer-to-peer (P2P) lending acts as a flexible investment alternative where start-ups or established businesses can borrow funds and negotiate directly with willing investors such as self managed super funds, at mutually acceptable investment terms and conditions.
funding4business has recognised this technological and cultural shift and is the first and only peer-to-peer (P2P) marketplace in Australia, specifically established to facilitate Start-up funding and business loans, by connecting Aussie business borrowers together with Aussie investors such as SMSFs, and HNWIs for their mutual benefit.
The funding4business marketplace is open and transparent, offers a broad range of investment options, provides flexibility, offers potentially better investment returns, faster and simple settlement, online registration and algorithmic loan matching to your investment criteria.
funding4business is not a bank, finance company or lender, and we are not owned or backed by a bank or finance company.
We are an Aussie company, with an Aussie team, applying Aussie know-how, to an emerging P2P alternative investment marketplace for Aussie business borrowers and Aussie investors.
funding4business was launched in Australia on 1st August 2014.