Like other Baltic countries, Latvia has a very attractive policy for potential investors. Therefore, large companies are trying to invest money in this country. Since the financial market regularly develops, new tools for investing appear. One of these ways is crowdfunding.
It appeared because banks check their clients very thoroughly and are not always ready to believe in the ideas of potential businessmen to issue finances to implement their projects. As a result, they have to look for very large amounts of money, which not every bank is ready to give. Thanks to this tool, a large number of investors contribute small amounts, but in the end, it yields large investments.
Since this process is extremely important, crowdfunding in Latvia is developing at a decent pace.
Who can grant investment licenses in Latvia
Crowdfunding is an intermediary between companies that have ideas with companies that have money. At the same time, investments made with the help of crowdfunding can be considered as either a loan or an investment in the company’s capital.
According to EU legislation, any investment activity in Latvia can be carried out by companies, which have the corresponding license. An investment license in Latvia can be issued by Latvijas Banka. The activities of such companies are regulated by the EU Regulation 2020/1503.
This license will also apply to crowdfunding operations. Therefore, when choosing a company to provide crowdfunding services, make sure that it has the appropriate license and that the company operates legally.
Crowdfunding deal participants
The following types of representatives are involved in this area:
- project owners (individuals or legal entities seeking financing for their project);
- investors who are ready to invest their funds in potentially profitable projects;
- crowdfunding operators, help investors to find projects and vice versa on the relevant platforms.
Crowdfunding operators in Latvia are intermediaries. Their task will be to help find investors with the right sums to implement interesting projects. As a rule, such companies try to work for the future, so that in the future investors and project developers also apply to them.
However, to be able to offer their services in this market, they need to obtain the appropriate license.
How to obtain a crowdfunding license in Latvia
Obtaining investment license in Latvia for crowdfunding is no different from obtaining similar documents for other types of activities. The operator only has to:
- meet with representatives of Latvijas Banka and present the company (tell the business model of the platform, show the developments, etc.). Based on the obtained data the possibility of granting such a license will be evaluated;
- if it is approved, the operator must submit the requested documents for consideration;
- wait for the completion of the evaluation of the application and, if necessary, make adjustments. Applications may be reviewed for up to six months;
- obtaining a license and instruction regarding further cooperation in this area.
Only those companies which are successfully registered can apply for a meeting with Latvijas Banka. If the company only plans to register, it is best to seek help from investment company registration services in Latvia. With their help, you can overcome the registration procedure faster, because their employees know how to proceed. To register a crowdfunding company you need:
- the form of ownership must be LLC or JSC;
- to supply details concerning the originators;
- To have a banking account in Latvia;
- the accepted funds have been paid (minimum 50 000 euros);
- an annual fee has been paid (does not apply to the documents with an indefinite term).
This document obtained will be valid in the whole EU. Accordingly, it will be possible to choose not only Latvian projects. This is another advantage of working in the Latvian market.
What are crowdfunding platforms
Crowdfunding operators work mainly in the online format. Therefore, they create special sites through which applications can be placed to invest in a project. Such services are also called crowdfunding platforms.
Crowdfunding platforms in Latvia have all operators in the market. On their platforms, they may indicate a guaranteed non-material benefit for investors, who will directly participate in the project.
They also undertake to ensure different nuances. For example, it is a question of financial transactions (there is a corresponding function for processing payments on the platform) or legal registration of the transaction.
In addition, you can promote your ideas on the platform, and after establishing contact between the investor and the project owner, communication is possible within the platform. Due to the presence of crowdfunding platforms, the work on search and cooperation is greatly simplified, because investors and project owners can be physically located in any European country and they do not need to organize a physical meeting.