Exempt Capital Markets Critical for Small Business in Canada

Next wave, crowdfunding, a new task for already challenged regulators in fragmented system

Finance Minister Joe Oliver speaks in the House of Commons on Parliament Hill in Ottawa, April 30, 2015. He gave the keynote speech on May 19 in Toronto at the PCMA Private Capital Markets Conference and calls crowdfunding the "new way to raise capital." The Canadian Press/Adrian Wyld

By definition, the average Canadian hears very little about the country’s exempt or private capital markets. Not much is typically known about the raising of capital to fund the operations of small business as opposed to that of public companies that issue stock or bonds.

But private capital is critical for financing small business and entrepreneurship, and it ultimately leads to job creation. It also provides unique opportunities for wealthy investors.

The exempt capital markets feature higher-risk securities being sold to eligible investors without extensive public disclosure documentation. The investors, such as venture capitalists or private equity funds, among others, will often work closely with the small business or start-up providing advice with the aim of improving the investment’s chance of success.

Small businesses and entrepreneurs cannot afford the cost of public disclosures, aren’t typically seeking the greater amount of funding sought in public markets, and don’t have the time or personnel to deal with the duties of being a public company. Their focus has to be on developing the business itself.

This new way to raise capital [crowdfunding] is taking the world by storm.

— Joe Oliver, Finance Minister