WEALTHBRIDGE INDUSTRY GUIDES:

Setting up your Crowdfunding Company in Singapore

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How to Open a Crowdfunding Company

Over the past few years, more and more Singaporean companies, especially start-ups have been seeking other ways to finance their businesses. And crowdfunding is one of the latest yet most promising options. Basically, it is a legit way to receive funds for a variety of purposes, whether you are attempting to fund your artistic project or looking for the capital for a new business. The increasing demands on this notion open up new opportunities for crowdfunding platforms to grow and get more profits.

Just like incorporating a company in Singapore, setting up your own crowdfunding business isn’t difficult if you know how to do it. Keep reading our comprehensive guide to learn more about this process.

4 forms of crowdfunding businesses in Singapore

Before setting your own crowdfunding platform, it is necessary to understand the options available because the requirements for setting up will vary based on your business model. Basically, there are 4 forms of crowdfunding companies:

  • Donation crowdfunding companies: In this model, those individuals who give out money won’t expect anything in return for their donation. Thus, it is often used for artistic endeavors and charities.
  • Reward crowdfunding companies: This is the most popular model in which people will invest in non-monetary reward in return. It would be a simple T-shirt or even a mug. The main reason is that they might want to support an innovative product, ideal, or cause.
  • Lending-based crowdfunding companies: This model facilitates financial transactions between the borrowers and investors. Basically, the borrowers will agree to pay back both the principal and interest at a specific date, which is similar to bonds investments.
  • Equity crowdfunding companies: This model is similar to investing in stocks except that the companies are all private instead of listed. Investors will provide capital in exchange for the stake in the businesses. Thus, they will get dividends and capital as the share values increase.

Setting up a crowdfunding company in Singapore

In Singapore, all crowdfunding platforms which offer an alternative financing model for SME enterprises and start-ups must be licensed and regulated by th MAS (Monetary Authority of Singapore). Therefore, if you are planning to set up your crowdfunding business, your first need to make sure that the company meets all the requirements by MAS.

As said earlier, the specific setup requirements will depend on your business model:

  • For reward and donation crowdfunding model:

In general, MAS’ regulations don’t apply for these crowdfunding models. Thus, you can set up your platform just as incorporate a usual company in Singapore. However, keep in mind that the Singapore’s Commissioner of Charities will provide a voluntary practice code to ensure peace of mind for the givers. This means your platform has to verify the legitimacy of any fund-raising appeal and make public all of the received donations, commission, and fees.

  • For equity and lending-based model:

If you want to set up an equity or lending-based crowdfunding model, you first need to get a CMSL or Capital Market Services License granted by the MAS under the Securities and Futures Act. It mandates that every licensed crowdfunding platform must ensure the right segregation of investor’ monies and keep suitable transactions’ records.

When it comes to the base capital requirement, the MAS has made it simpler for companies to start their businesses and raise funds. Now, you just need a share capital of 50000 SGD rather than 250000 SGD as before to set up a new platform. Also, the authority removes the cause of 100000 SGD security deposit, which used to be a significant barrier for new crowdfunding companies.

But keep in mind that these requirements are only applied to those platforms which cater to accredited investors. More importantly, keep in mind that if your fund-raising companies are listed on the SCF platforms, then you would give small offers without generating a prospectus.

Final Word

While crowdfunding is still a relatively new concept, more and more people and start-ups are seeking opportunities with these platforms. By following our useful tips and read the regulations of the MAS, you will set up your crowdfunding and achieve success in the future. Just make sure to consider every option carefully before you decide to make any move.

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