SME Capital Raising: Advisors Need To Know The Details

Accountant's Minute 193

Former Greencross Limited Chairman, Andrew Geddes, believes the new capital-raising process, Crowd Sourced Funding Equity Raising, could be a real wake-up call for small and medium sized companies to expand.

“Raising capital places as lot of pressure on businesses to justify that they’re worth lending to” said Mr Geddes, a highly experienced public company director.

“To raise capital, SMEs have to go through all the disciplines of getting their ‘house in order’ before investors will even consider supporting them, and in many ways, that’s a good thing” he said.

Mr Geddes says the preparation required for any form of loan or capital raising forces companies to take a very serious look at their structure and operations.

“To put a Crowd Sourced Funding Offer Document together, a company needs well-documented Business Plans, Budgets and Cashflows, its corporate vision, purpose, strategies and goals must be clearly defined, and a thorough assessment made of their customer base” he said.

“Just going through this rigorous process with your accountants can help clarify whether your company is ready to start raising capital or whether there’s still some work to be done” claimed Mr Geddes.

Almost $30-million has been raised since Crowd Sourced Funding Equity Raising became legal in Australia seven months ago.

Mr Geddes sees Crowd Sourced Funding as one of the most exciting developments for SMEs in a generation, describing it as a process that will let small companies raise capital without having to prematurely list on the Stock Exchange, an option he potentially sees as being fraught with danger.

“Launching an IPO typically costs up to a million dollars, but the average Crowd Sourced Funding capital raise comes in less than 20% of that, including the Intermediary’s commissions.  For most small businesses, it’s likely to be a far more affordable option” said Mr Geddes.

“I think it’s really important for accountants and their clients to fully understand the pros and cons of Crowd Sourced Funding, and the best way to do that is to begin with research” he said. “The ESS BIZTOOLS website  contains a lot of information and is a good place to get started”.

Qualifying SMEs are able to raise up to $5-million each year through Crowd Sourced Funding Equity Raising and there are virtually no limitations on the types of businesses that can raise capital.

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Have a great day!

Peter Towers

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