Two ways to raise.

Mini-bonds are a way for companies to raise money directly from investors. Instead of taking a traditional bank loan, a company issues a debt security that investors can purchase. In return, investors typically receive interest and expect their original investment to be repaid at the end of the agreed term.

Under the European Crowdfunding Service Provider Regulation (ECSPR), certain mini-bonds can be offered through an authorised crowdfunding platform as an investment-based crowdfunding product. The exact structure of the mini-bond matters, as “mini-bond” is a market term rather than a specific legal category under the ECSPR.

The ECSPR sets rules for how these investments can be offered and includes protections for investors, particularly non-sophisticated investors. Crowdfunding offers covered by the Regulation are generally subject to a €5 million limit over a 12-month period, calculated according to the rules set out in the Regulation.

Under the European Crowdfunding Service Provider Regulation (ECSPR), a loan is a way for a business to raise money directly from investors through a crowdfunding platform. The investor provides an agreed amount of money for a specific period, and the business has an unconditional obligation to repay the investment, together with interest, according to the agreed repayment schedule.

In simple terms, it works much like a traditional business loan, but instead of the money coming from one bank, it can come from multiple investors through a crowdfunding platform. For example, a company could raise €500,000 from 500 investors, with each investor providing €1,000. The company would then repay the investors according to the agreed terms, including any interest.

Under the ECSPR, the crowdfunding platform facilitates the loan rather than becoming the lender itself. The platform can present investment opportunities, facilitate the agreement between investors and the business, and may assess or help determine the credit risk and pricing of the project. The platform must also provide investors with relevant information about the investment and the associated risks.

The ECSPR also includes specific investor protection requirements, particularly for non-sophisticated investors. These include a knowledge and experience assessment and a simulation of their ability to bear losses before they invest. Crowdfunding offers covered by the ECSPR are generally subject to a €5 million limit over a 12-month period, calculated according to the rules set out in the Regulation.

Equity crowdfunding allows investors to invest in a company by acquiring an ownership interest, usually in the form of shares. Instead of lending money to the business, investors become shareholders and can potentially benefit from the company’s future growth and profits. The value of the investment can also fall, and investors may lose some or all of the money they invested.

Under the European Crowdfunding Service Provider Regulation (ECSPR), equity crowdfunding is part of investment-based crowdfunding. An authorised crowdfunding platform can facilitate the investment by offering transferable securities or certain shares in private limited companies that meet the ECSPR requirements. The exact type of equity instrument and its transferability depend on the applicable legal and national framework.

The ECSPR includes specific investor protection and information requirements. Investors must receive clear information about the company, the investment and the associated risks, while non-sophisticated investors are subject to additional protections. Crowdfunding offers covered by the ECSPR are generally subject to a €5 million limit over a 12-month period, calculated according to the rules in the Regulation.

A secondary market allows investors to sell an investment they have already made to another investor, rather than waiting until the investment reaches its end date. In crowdfunding, this can make investments such as loans, shares and other securities more flexible, as investors may have an opportunity to exit their investment before the original project or loan has ended.

Under the European Crowdfunding Service Provider Regulation (ECSPR), crowdfunding platforms may operate what is known as a “bulletin board”. This allows investors who previously invested through the platform to advertise their interest in buying or selling loans, transferable securities or other eligible crowdfunding instruments that were originally offered on that platform.

Importantly, an ECSPR bulletin board is not the same as a stock exchange or trading venue. The platform cannot use its own internal system to automatically match buyers and sellers and execute contracts on a multilateral basis. Instead, it provides a place where investors can advertise their interest and potentially find another investor willing to buy or sell. The transaction is ultimately at the investors' discretion and responsibility.