From mini-bonds to crowdfunding. These are the financial instruments preferred by SMEs (small and medium enterprises) and start-ups to raise capital, without asking banks. So much so that the European Commission is working on a legislative text that should allow crowdfunding platforms to operate at European level.
“Like mini-bonds, crowdfunding is also an important source of funding every year for about half a million European projects that would otherwise never receive the funds to see the light” explains Marco Roccabianca, CEO of Mgk Advisor & Consulting SA, a leading company in the international financial sector. “The objective of the European Commission is to expand funding channels across Europe and better target savings to finance the real economy.
How do I access this new source of finance? According to the text that the Commission is working on, platforms wishing to raise funds at a transnational level, and thus operate within any state, will have to seek the approval of a European provider of crowdfunding services (Ecsp) and register with Esma (the European Securities and Markets Authority, which is based in Paris).
According to the Commission’s assessment, Esma will be the supervisory body for the activity of the crowdfunding platforms at the European level and that of the 25 national ESCPs, with an estimated cost of €2.5 million in the first year.
There is a limitation in the text. Individual platform financing offers may not exceed €1 million per year, over 12 months. They will also have to provide a description of the procedures for risk assessment and the fight against fraud. Esma will have 20 days to approve the application for accreditation and will be able to conduct surveys on the persons responsible for the platform and on customers.
There is no shortage of a fine for those who violate the regulation, but it will not exceed 5% of the annual turnover of the platforms. And, two years after the entry into force of the regulation, the Commission undertakes to submit to the European Parliament and the Council a report on the application of the text and its operation.
“After years of experience in the area manager of the banking sector,” concludes Roccabianca, “I now want to help companies finance their projects through alternative routes to the traditional banking channel. I welcome this directive of the European Commission, an index of the open-mindedness of entrepreneurs.”