Funding alternative ‘potential’, says Bruton
Crowd funding entails the use of small amounts of capital from a large number of individuals to finance a new business venture, typically with information on the investments available published on a crowd-funding website. It bypasses the need to seek a loan, often with high interest rates, from financial institutions.
Cork Business Association president Ernest Cantillon has latched onto the benefits of the phenomenon. He crowd sourced for €10,000 of a planned €60,000 fit-out of the riverside coffee pod on the city’s South Mall through linkedfinance.com.
Such was the interest that, within two days, Mr Cantillon reached his target and was oversubscribed by 300%-400%, even though the average investment was just €150. He said it could have raised up to €300,000.
“It is definitely something we would look to do again,” he said. “Those who have invested will have an affinity for the place because they will want to see it succeed.”
The Government has forecast that crowd funding could become an alternative source of funding for small- and medium-sized enterprises into the future.
Enterprise Minister Richard Bruton said the crowd funding model is becoming an even more popular alternative financial mechanism for businesses and promoters across the globe to access finance in difficult financial markets. He said it appeared to be affording real opportunities in alternative finance for SMEs.
“It is seen by many sponsors as a means of ‘democratising’ access to funds and supply of capital and moving the model away from venture capitalists and angel investors,” he said.
“Data is not yet readily available domestically, at EU level, or internationally, with which to analyse its impact to date, although moves are afoot at EU level to consider methods to address this data deficiency.”
Mr Bruton said the industry needs time to “find itself” and so he was keeping it under review as to how to best utilise its benefits to promote business development. “I am also aware that crowd funding is being discussed seriously within the European institutions and the OECD as an alternative source of SME financing,” he said.
“Ireland will continue to actively engage with the relevant institutions in these deliberations and is fully committed to providing an appropriate policy response with regard to the emerging need to establish a European framework and ecosystem for best practices.
“In view of the early stage of development of this concept, my department would of course welcome any stakeholder views on how to optimise the potential of this developing phenomenon for securing additional finance for business growth and jobs.”
*linkedfinance.com
