Need money for growth? SEC tells small businesses to try crowdfunding

The Securities and Exchange Commission (SEC) wants more small businesses to consider alternative fundraising sources such as crowdfunding, whose benefits it plans to underscore during a roadshow in Davao City on Wednesday.

The event will highlight how even micro, small and medium sized enterprises can finance growth by tapping the capital market, which is usually reserved for large businesses and conglomerates.

Crowdfunding allows businesses to raise money from a large pool of small investors though an online platform.

The SEC regulates the sector and does not require prior registration of the securities as long as investments are solicited thought accredited third parties.

There are currently three crowdfunding intermediaries registered with the SEC: Investree Philippines, SeedIn Technology Inc., and Eastern Securities Development Corp. (Round One).

Those firms act as investment managers that use pooled money from small investors. On SeedIn’s website, it noted that investments are rigorously vetted and loans are backed by collateral. In exchange, investors can earn annualized returns of 7 percent or more.

“The COVID-19 pandemic has caused many financial problems for a lot of MSMEs around the country. We at the SEC hope to stem their financial woes by providing possible solutions to these enterprises, particularly through the capital market and crowdfunding,” SEC Chair Emilio B. Aquino said in a statement on Monday.

Within a 12-month period, a small business may raise as much as P10 million when its securities are offered and sold to any investor, and up to P50 million when offered and sold to qualified investors, the SEC said.

Aquino will lead the Davao roadshow alongside speakers from the Philippine Stock Exchange, Investment & Capital Corp. of the Philippines, the Philippine Chamber of Commerce and Industry, Investree Philippines SeedIn Technology, and Round One.

The program is an initiative of the newly created SEC Office for the Advancement of Strategic Investments in SMEs.

“OASIS seeks to promote the interests of SMEs by setting up viable alternatives in raising capital by simplifying the capital-raising products, streamlining the registration process, and encouraging investment houses and other financial institutions to implement SME-friendly underwriting and advisory programs, among others,” the SEC said.