New lending options for businesses have opened up after licences were issued to seven crowdfunding platforms, with hopes they will help improve SMEs and start-up access to finance.
Just a few years ago, few people heard of the terms “crowdfunding” or “peer-to-peer lender”. However, in a sign of the changing times, the financial regulator ASIC has issued the first financial operator licences to crowdfunding platforms, opening the door to a new channel for growing businesses and start-ups to secure funding.
The first seven crowdfunding intermediary licences were awarded to Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and On-Market.
“Equity crowdfunding gives us an opportunity to accelerate our growth and bring Australians who believe in our product with us along the way,” said John Nolan-Neylan, the founder of Revvies.
The Australian business, which produces caffeine strips to boost energy for sportspeople and athletes, is using OnMarket as a means of funding expansion of its product range, which is already being trialled or used by selected AFL and NRL clubs as well as members of the Australian and US Olympic teams among others.
“It’s time all Australians had a fair go and access to Australian businesses of the future. Previously, investing in businesses like Revvies would only be accessible to angel investors or venture capital firms, but through equity crowdfunding, investment democratisation is here to stay,” said OnMarket founder and CEO Ben Bucknell.
“Equity crowdfunding is an innovative way to fund someone else’s dream.”
According to Mr Bucknell, equity crowdfunding is already worth around US$2.6 billion (approximately $3.3 billion) in the US and £272 million ($468 million) in the UK. He added that crowdfunding will eventually go a long way to helping overcome the estimated $60 billion shortfall in funding sought by Australian businesses.
Meanwhile fellow licencee Birchal announced almost straight away that it had already opened three funding campaigns for consumer brands GreenCo Water, Oscar Razor and SAMPLE Brew.
It said a number of other businesses will also soon join the platform, across various industries including beverages, energy, technology and sports.
“The crowd sourced funding regime was established under the Corporations Amendment (Crowdsourced Funding) Act 2017 which came into effect on 29 September 2017, and makes it possible for all Australians to invest in unlisted public companies from as little as $50,” the company said in a statement.
The federal government welcomed ASIC’s move, with revenue and financial services minister Kelly O’Dwyer calling it a “groundbreaking” move that will help small and innovative companies access much-needed funds to grow.
“This framework … has removed regulatory barriers enabling Australian entrepreneurs to obtain the capital they need to turn good ideas into commercial successes. It will help Australia be a country of new innovative businesses, which is good for jobs and good for consumers,” she said.
“This new source of funding creates opportunities, especially for small businesses in the early growth stage. This is all about delivering more jobs, higher wages and greater growth for our economy by ensuring Australians are able to harness new and innovative ways of developing and growing businesses.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.