By Vlad Cuc, specialist in company formation matters
Crowdfunding is a method of financing for companies, businesses or projects, that is based on small amounts of money collected from a large number of people via an online platform. Currently, there are no laws in force for regulating crowdfunding for Hong Kong start-ups. However, the platforms that allow for this type of funding are subject to the regular rules and regulations for lending money and the liabilities that may arise therein.
Crowdfunding can be a good option to finance your business and it may be more accessible for certain start-ups than regular loans from a bank in Hong Kong.
The advantages of crowdfunding in Hong Kong
Crowdfunding is a different concept from most alternative financing options for companies, like venture funding. While most companies rely on a large amount of money obtained from very few companies or individuals, those who choose crowdfunding do the opposite by relying on small amounts of money from a large number of people.
This approach can be beneficial for small business owners and projects because the fundraiser can also receive direct feedback from the donors. Crowdfunding is also advantageous because it has a low risk for the fundraiser and it is a social collaboration between the business and it possible future target clients.
Types of crowd funding in Hong Kong
Crowdfunding takes place through an online platform where the fundraiser sets a public donation campaign. The presentation of the project is essential because this is also the first stage when the idea of the project will become known. A deadline for the funding and the amount of needed money are also made public.
There is more than one type of crowdfunding, according to the type of investments made:
– equity crowdfunding: shares are offered in exchange for capital;
– debt crowdfunding: the investor receives his money back, plus interest;
– donation crowdfunding: investments with no expectations, simply for the cause; in some cases a reward can be given to the investor such as tickets, albums, free gifts and others.
The type of crowdfunding can depend on the type of project. Our company registration agents in Hong Kong can give you more details about how lending is regulated in the city and which option is best for your needs.
For more information about alternative funding options for companies as well as start-up costs and the company incorporation process, please contact our company registration representatives in Hong Kong.