Crowdfunding, another source of financing
It is common knowledge that the granting of credit by banks has become more restricted and more difficult as time goes by. Inflation, the rise in rates and, in general, an economically slow year 2023 -which was reflected in the companies’ balance sheets- has led to a limitation of traditional financing through banks.
But the need for financing has been maintained and even increased, which has forced companies to look for alternative ways to meet their cash flow needs.
What is Crowdfunding?
A particular form of financing that has taken off in recent years is crowdfunding or “collective financing”, which makes it possible to reach multiple individuals, encouraging them to finance whatever the companies require. Different mechanisms can be used (investment-based crowdfunding, when the financing involves investing in the company itself, and loan-based crowdfunding, when investors only want to lend money to the company). The amounts are set and all this is done through platforms that generate communication between companies that require financing and individuals and legal entities that want to contribute capital to the company.
Regulations
The new Chilean Fintech Law governs crowdfunding platforms and requires them to provide sufficient, timely and reliable information regarding their activities, the investment mechanism, which companies are financed, etc., It will therefore be possible to analyze with real data the impacts of this industry, as well as the conditions under which such financing is carried out and its risks.
For more information on crowdfunding and its regulation in Chile, please contact our Associate Constanza Bengoa – cbengoa@palma.cl