Nowadays the market offers various forms of financing that can be used for the development of all kinds of projects, among which we find the crowdfunding, which is defined as a form of collective financing through the participation of many people in some project in exchange for some kind of remuneration or compensation, i.e. it is a fundraising model where it seeks to obtain the support of a large number of individuals (investors, donors, etc.) who contribute various amounts of capital to cover the financing needs of different types of projects that tend to be presented to the community through digital platforms.

There are different types of crowdfunding that depend on the type of retribution or compensation received by the individuals who contribute the capital, and can be classified as financial and non-financial in the first instance, The first type being those projects in which a financial retribution is expected in exchange for the capital contribution and the second type being those projects in which there is a social or personal motivation of those who contribute the capital and therefore expect a type of non-financial compensation as in the case of donations or the funding of projects in exchange for a product or service that does not entail a participation in the business or the payment of an interest rate.

Within the types of financial crowdfunding we find different modalities, being two that we consider that, for example, could fit within the Salvadoran legal system as a tool for financing the execution of projects: (i) Crowdlending or private-to-private lending, which seeks that investors grant loans, credits, mutuals or any other financing causing a direct or contingent liability for the project holder, which allows it to finance itself without the intervention of a traditional financial institution; and (ii) Royalty crowdfunding or co-ownership or royalty crowdfunding, whose purpose is that the investors and the project owner enter into an agreement whereby the investor acquires an aliquot or participation in a present or future asset or in the income, profits, royalties or losses obtained from the execution of the project.

It is necessary to clarify that although the modalities detailed above, depending on how they are structured, may fit within the legal system in figures regulated by general laws that are not subject to the prior approval of regulatory entities for their execution, such as consumer loans and participation contracts, there are modalities that by their nature may not be carried out under the crowdfunding model in certain legal systems or should have the prior authorization of a regulatory agency.

For example, in El Salvador: i) Certain kind equity crowdfunding activities cannot be carried out, since the purpose of such activities is for investors to purchase or acquire securities representing the capital stock of legal entities acting as applicants, activity that is within the scope of application of the Salvadoran Securities Market Law (Ley del Mercado de Valores), which establishes that the public offering of securities exists when a call is made to subscribe, dispose or acquire securities by any means of mass communication or to undetermined persons, establishing a series of indispensable requirements for the realization of such activity; and ii) Crowdlending (Oferta Pública de Deuda), royalty crowdfunding (Oferta Pública de Ingresos) or equity crowdfunding (Oferta Pública de Propiedad) activities through a public offering of digital assets is permitted as long as it complies with the provisions of the Digital Asset Issuance Law (Ley de Emisión de Activos Digitales).

In short, crowdfunding is a tool that allows the owner of a project to raise funds from people who have capital that they wish to use to invest in a percentage of the financing of a specific project.

In any case, the success and legality of crowdfunding activities will depend mainly on the way in which the crowdfunding is structured, therefore in each case the following points should be evaluated: (a) The way in which the project will be structured so that it can be effectively executed; (b) The fiscal obligations and contingencies linked to the receipt of the crowdfunding or the delivery of the remuneration; and (c) The form of constitution and execution of the guarantees when these are offered as part of the financing process.