The Financial Markets Authority has granted the first licence to a "peer-to-peer" lending firm.
A law change in April allowed entrepreneurs to sell shares to the public through licensed crowdfunding platforms with little red tape and for business and individuals to borrow money from others through licensed peer-to-peer lending platforms.
Until today, the authority had not granted any licences to such intermediaries.
The financial markets regulator said it had granted its first peer-to-peer lending licence to Auckland-based company Harmoney.
Harmoney said its initial focus was to provide a marketplace for personal loans, rather than business loans.
There is a cap of $2 million a year on the amount of money businesses or individuals can raise through equity crowdfunding or peer-to-peer lending in a 12-month period.
Commerce Minister Craig Foss said in February that equity crowdfunding would provide a new avenue for early-stage and growth companies to source the "risk capital" they needed to grow.
But DLA Phillips Fox partner Sue Brown said some peer-to-peer lending schemes had failed in Britain and the United States, and while equity crowdfunding might seem a low-cost way for businesses to raise capital, it could prove to be false economy.
"Offering shares through crowdfunding may seem to be 'cheaper' in the short term, but it has significant implications for ownership and control of the business," she said.
FMA compliance director Elaine Campbell said licensed peer-to-peer lending was a new service that brought new opportunities.
"Peer-to-peer lending has already proved popular in Europe and the United States, and we've been able to build on that experience," she said.
Licensing peer-to-peer lending services was part of the Government's business growth agenda, but people considering lending money through such platforms should recognise that the risks were greater than putting money in a bank, she said.
The authority has put together online advice for lenders and borrowers and people considering investing in equity crowdfunding.
- The Dominion Post