Crowd Source Equity Funding is a relatively new way to raise the funds needed to expand your business or to kick start a new venture.
First things first. CSEF stands for Crowd Source Equity Funding. It’s a relatively new way to raise funds to expand your business. CSEF is evolving here in Australia with the introduction of the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Act 2018.
Here are some tips to help you navigate CSEF for your business or future business idea.
Find out whether your business is eligible
Your business might be eligible for CSEF if:
- You have an annual turnover and gross assets of less than $25 million.
- You have a proprietary company – but not a listed company.
- You have at least two directors.
- Your business model is not based on investing in other companies or schemes.
If you meet these and all of the other criteria, you could raise up to $5 million in total through CSEF, with each individual investor investing up to $10,000.
Use a licenced intermediary
Rather than the funding going straight from investors to a business through an app (such as Kickstarter), CSEF uses a third party, or intermediary.
If you’re eligible, you can access funding through a list of licenced intermediaries, including Big Start, Billfolda, Birchal Financial Services, Equitise, Global Funding Partners, IQX Investment Services and On-Market Bookbuilds.
Manage your investor expectations
CSEF can be a great way to get the funds you need to invest in your business. It’s important to understand the regulations and restrictions involved, and the time and effort you’ll need to invest to apply for funding and maintain the standards of accounting and reporting your CSEF investors’ need.
CSEF sets your business up in a similar way to listing your business on the stock exchange, so your investors become shareholders. This means they are buying into your business and expect a financial return on their investment.
To meet the expectations of your investors, you’ll need to prepare official directors’ reports and financial reports, even if you’re a tiny operation.
If you’d like to learn more about growing your business speak with one of our small business advisors.