Crowdfunding primer

Equity crowdfunding, crowdlending (debt) and other P2P financing options

If you prefer not to raise a debt or equity financing from a single or several conventional investors, you can turn to a more diverse and public financing type, which is a peer-to-peer (P2P) financing, or crowdfunding. This way you are getting financing from large groups of people who want to allocate their funds in projects they believe are worth investing in. Crowdfunding is usually done through special platforms that connect investors with projects and their founders. These platforms have several types of fees for the transaction, as they act as an intermediary. However, nowadays crowdfunding regulation is tightening and getting more regulated by the government, much like stock exchange. You can find a comprehensive crowdfunding guide in our crowdfunding primer.

Crowdfunding types and definitions

There are 3 main crowdfunding types – equity crowdfunding, crowdlending and reward/donation crowdfunding

It is important to distinguish between crowdfunding definitions

Model name
Crowdfunding Category
Definition
Reward-based crowdfunding
Reward/donation crowdfunding
Donors have an expectation that fund recipients will provide a tangible but non-financial reward or product in exchange to their contributions.
Donation-based crowdfunding
Reward/donation crowdfunding
Non-investment model in which no legally binding financial obligation is incurred by fund recipients to donors; no financial or material returns are expected by the donor.
Equity crowdfunding
Equity crowdfunding
Sale of registered securities, mainly by early-stage firms, to both retail, sophisticated and institutional investors.
Equity crowdfunding (Real Estate)
Equity crowdfunding
Direct investment into a property by individuals, usually through the sale of a registered security in a special purpose vehicle (SPV).
Peer-to-Peer Consumer lending
Crowdlending
Debt-based transactions between individuals/institutions to an individual; most of them are unsecured personal loans.
Peer-to-Peer Business lending
Crowdlending
Secured and unsecured debt-based transactions between individuals/institutions and businesses with trading history; most of which are SMEs.
Peer-to-Peer Business lending (Real Estate)
Crowdlending
Property-based debt transactions between individuals/institutions to businesses; most of which are property developers.
Invoice financing
Crowdlending
Businesses sell their invoices or receivables to a pool of primarily high net worth individuals or institutional investors.
Debt-based securities
Crowdlending
Individuals purchase debt-based securities (typically a bond or debenture) at a fixed interest rate. Lenders receive full repayment plus interest paid at full maturity.

Crowdfunding regulations

Crowdfunding is regulated in most North American and European countries, rapidly developing in Asia and Latin America, and just starting in Africa. Asia, Latin America, and Africa use the experience and world’s best practices from developed countries to foster their own growth and help in developing basic crowdfunding legislation. In almost all countries there is a raise limit up for each project and maximum thresholds for accredited investors and ordinary investors alike. Below is a summary of how crowdfunding is regulated nearly in every part of the world.

Regulation status: 3 - Regulated, 2 - regulation in progress, 1 - no regulation, but limit identified,
Unshaded regions - not regulated/no data

#
Country
Region
Regulation status
Regulator
1
USA
North America
$1 million
Regulated
Securities and Exchange Commission
2
Canada
North America
$1.5 million
Regulated
Province-by-Province regulator
3
Australia
Australia and others
$3.5 million
Regulated
Australian Securities and Investments Commission
4
New Zealand
Australia and others
$1.3 million
Regulated
Financial Markets Authority
5
United Kingdom
Europe
€8 million
Regulated
Financial Conduct Authority
6
Austria
Europe
€5 million
Regulated
ESMA*
7
Belgium
Europe
€5 million
Regulated
ESMA
8
Bulgaria
Europe
€1 million
Not regulated
ESMA
9
Croatia
Europe
€5 million
Regulated
ESMA
10
Cyprus
Europe
€5 million
Not regulated
ESMA
11
Czech Republic
Europe
€1 million
Not regulated
ESMA
12
Denmark
Europe
€8 million
Not regulated
ESMA
13
Estonia
Europe
€8 million
Regulated
ESMA
14
Finland
Europe
€8 million
Regulated
ESMA
15
France
Europe
€8 million
Regulated
ESMA
16
Germany
Europe
€8 million
Regulated
ESMA
17
Greece
Europe
€5 million
Regulated
ESMA
18
Hungary
Europe
€1 million
Regulated
ESMA
19
Iceland
Europe
€5 million
Regulated
ESMA
20
Ireland
Europe
€8 million
Regulated
ESMA
21
Israel
Europe
$1.7 million
In progress
Israeli Securities Law
22
Italy
Europe
€5 million
Regulated
Consob Regulation
23
Latvia
Europe
€8 million
Regulated
Financial and Capital Markets Commission
24
Lithuania
Europe
€8 million
Regulated
ESMA
25
Luxembourg
Europe
€8 million
Regulated
ESMA
26
Malta
Europe
€5 million
Regulated
ESMA
27
Netherlands
Europe
€5 million
Regulated
ESMA
28
Norway
Europe
€8 million
Regulated
ESMA
29
Poland
Europe
€2.5 million
Regulated
ESMA
30
Portugal
Europe
€5 million
Not regulated
ESMA
31
Romania
Europe
€1 million
Not regulated
ESMA
32
Russia
Europe
$15 million
Regulated
Federal Law
33
Slovakia
Europe
€1 million
Not regulated
ESMA
34
Slovenia
Europe
€3 million
Regulated
ESMA
35
Spain
Europe
€5 million
Not regulated
ESMA
36
Sweden
Europe
€2.5 million
Not regulated
ESMA
37
Swtizerland
Europe
-
Regulated
Swiss Financial Market Supervisory Authority
38
Saudi Arabia
Middle East
-
In progress
CMA/SAMA
39
United Arab Emirates
Middle East
$5 million
In progress
Dubai Financial Services Authority/CBUAE
40
Bahrain
Middle East
$265,000
Regulated
Central Bank of Bahrain
41
China
Asia
-
Regulated
China Securities Regulatory Commission (CSRC)
42
South Korea
Asia
$600,000
Regulated
Financial Investment Service
43
Japan
Asia
$1 million
Not regulated
-
44
Philippines
Asia
$1 million
In progress
Securities and Exchange Commission (SEC)
45
Malaysia
Asia
$856,000
Regulated
Securities Commission of Malaysia (SC)
46
Indonesia
Asia
$700,000
Regulated
Indonesian Financial Services Authority (OJK)
47
Taiwan
Asia
$500,000
Regulated
Financial Supervisory Commission (FSC)
48
Singapore
Asia
$3.6 million
Regulated
Monetary Authority of Singapore (MAS)
49
Hong Kong
Asia
-
Regulated
Securities and Futures Commission
50
India
Asia
$1.3 million
Regulated
Securities and Exchange Board of India
51
Thailand
Asia
$1.5 million
Regulated
Thai Securities and Exchange Commission
52
Argentina
South America
-
Not regulated
National Securities Commission
53
Brazil
South America
$1.5 million
Regulated
Commissão de Valores Mobiláros (CVM)
54
Chile
South America
-
Regulated
Financial Market Commission (CMF)
55
Columbia
South America
$2.6 million
Regulated
Colombian Stock Exchange
56
Mexico
South America
-
Regulated
National Banking and Securities Commission (CNBV)
57
Peru
South America
-
Regulated
Superintendence of the Securities Market (SMV)
58
Morocco
Africa**
$500,000
Regulated
African Crowdfunding Association (ACfA)
59
Nigeria
Africa
$255,461
In progress
Nigeria’s Securities and Exchange Commission (SEC)

*European Securities and Markets Authority
**Regulations in progress: Angola, Cameroon, Central African Republic, Chad, Congo, Kenya, Mauritius, Rwanda, Uganda, Equatorial Guinea, Gabon.
For other African countries - no regulations

Crowdfunding associations

#
Associaiton name
Region
Description
Website
1
UK Crowdfunding Association
Europe
The UK Crowdfunding Association was formed in 2013 with the purpose of promoting the interests of crowdfunding platforms, their investors, and clients. By working together and speaking with one voice we are successfully cooperating with regulators and lawmakers to take the industry forward as a force for positive change in the UK’s financial sector.
2
European Crowdfunding Network
Europe
Formally incorporated as an international not-for-profit organisation in Brussels, Belgium in 2013. The ECN supports members in carrying initiatives aimed at innovating, representing, promoting and protecting the European crowdfunding industry.
3
Crowdfunding Professional Association
North America
The CfPA mission is to create a strong and viable trade association for this new and emerging industry that supports the development of its members and encourages participation and awareness in crowdfund investing across the globe. The CfPA will help members get connected and stay networked in the Crowdfunding industry through CfPA communications, events and growing benefits.
4
National Crowdfunding Association of Canada
North America
NCFA is a cross-Canada non-profit, actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada.
5
African Crowdfunding Association
Africa
The African Crowdfunding Association (ACfA) is an industry association for the crowdfunding industry in Africa. We operate as a self-regulatory organisation (SRO) that promotes transparency and good governance in the crowdfunding industry. Founded in 2015 by several crowdfunding platforms, ACfA has a pan-African mission to develop and foster crowdfunding as a formalised development finance tool to broaden SME access to finance.
6
Crowdfunding Institute of Australia
Australia and others
The CFIA is a unified national voice for crowdfunding in Australia. The CFIA has been instrumental in lobbying for crowdfunding reforms, increasing public awareness, and creating a more cohesive industry structure that fills a unique and important role to champion local innovation, act as a national voice for crowdfunding, make research and education available to members, assist with job creation, and engage in advocacy on behalf of members.