Why a Company May Need an LEI When Raising Funds Through Crowdfunding
Most companies encounter the Legal Entity Identifier (LEI) through securities trading or investment services. A bank or broker may ask a company for an LEI when it opens an investment account or trades financial instruments.
However, securities trading is not the only situation where a company may need an LEI. The requirement can also arise when a business wants to raise money.
Business crowdfunding in the European Union provides one such example.
Thousands of businesses use regulated crowdfunding platforms to raise capital from investors. Lending-based crowdfunding represents the largest segment of this market. When a legal entity seeks funding, crowdfunding reporting rules require its LEI as the entity identifier.
How Lending-Based Crowdfunding Works
With a conventional business loan, a bank or another lender typically provides the money. Lending-based crowdfunding works differently: a digital platform connects a business seeking funding with multiple investors.
For example, a company needs €250,000 to expand its operations. Instead of borrowing the entire amount from a bank, the company launches a funding project on a crowdfunding platform. Dozens or hundreds of investors can then contribute to finance the required amount.
In simplified form:
Investors → crowdfunding platform → business raising funds
The European Securities and Markets Authority (ESMA) describes crowdfunding as a form of alternative finance in which platforms connect prospective investors or lenders with businesses seeking funding. This type of financing can offer start-ups and SMEs an alternative to traditional sources of finance.
How Large Is the European Crowdfunding Market?
Crowdfunding is not a small niche market.
According to the latest official crowdfunding market data available from ESMA, 181 active crowdfunding service providers operated in the EU in 2024 and raised approximately €4.25 billion.
ESMA published the report in December 2025, and it covers the 2024 calendar year. These currently represent ESMA's latest available annual market data for EU crowdfunding.
Of the 181 active providers, 92 offered lending-based crowdfunding. Lending-based projects accounted for 58% of all crowdfunding raised, equivalent to approximately €2.47 billion.
The number of projects also shows the scale of the market. More than 10,000 lending-based crowdfunding projects took place in the EU in 2024, with more than 5.5 million investor participations. This figure does not necessarily represent 5.5 million unique investors because the same investor can participate in multiple projects.
On average, each lending-based project raised approximately €240,000.
Crowdfunding plays a particularly important role in smaller funding rounds. ESMA found that 46% of all projects raised less than €1 million. Within this group, lending-based crowdfunding accounted for 91% of the money raised.
Why Does the LEI Come Into the Picture?
The European Crowdfunding Service Providers Regulation (ECSPR), Regulation (EU) 2020/1503, governs the EU market for business crowdfunding.
ECSPR creates a common EU framework for investment-based and lending-based crowdfunding used for business financing.
Authorised crowdfunding service providers submit information about projects funded through their platforms to their national competent authorities. These authorities then provide anonymised data to ESMA.
For this reporting system to work, regulators need to identify the project owner accurately.
This is where the LEI comes in.
The EU crowdfunding reporting rules in Commission Implementing Regulation (EU) 2022/2120 specify which data and identifiers crowdfunding service providers must report.
When the project owner is a legal entity, the reporting format requires its LEI as the identifier. For a natural person, the reporting format uses a different identifier.
This means that a company may need an LEI even when it does not trade securities.
It may need one simply because it wants to raise money through an EU-regulated crowdfunding platform.
Who Is the Project Owner?
Under ECSPR, a project owner means a natural or legal person who seeks funding through a crowdfunding platform.
ESMA has also clarified how this concept applies to lending-based crowdfunding. In general, the project owner is the entity that receives the investors' money and has the unconditional obligation to repay the loan, together with accrued interest, according to the repayment schedule.
For example:
Investors → provide €300,000 → crowdfunding platform → ABC Ltd
If ABC Ltd receives the loan and must repay it, ABC Ltd acts as the project owner. Because it is a legal entity, the crowdfunding reporting format uses its LEI to identify it.
Does Every Crowdfunding Project Require an LEI?
No.
ECSPR covers investment-based and lending-based crowdfunding for business financing. The regulation does not cover models such as donation-based or reward-based crowdfunding.
The reporting rules also do not use an LEI to identify a project owner who is a natural person. The LEI requirement discussed here applies when a legal entity acts as the project owner.
ECSPR also sets a monetary threshold for its scope. In general, the framework covers crowdfunding offers up to an aggregate consideration of €5 million per project owner over a 12-month period, subject to the calculation rules in the regulation.
It would therefore be incorrect to say that every company in Europe needs an LEI to obtain a loan.
The LEI requirement in this case comes from a specific regulated crowdfunding framework and its reporting rules.
What Does a Crowdfunding Platform Report About a Company?
Crowdfunding reporting goes beyond the company's name.
Authorised crowdfunding service providers report project information that includes the project owner's identifier, the amount raised and currency, the crowdfunding instrument, investor type and country of tax residence, the number of investors and invested amounts.
For a legal-entity project owner, the reporting format requires an LEI.
The EU crowdfunding reporting rules set out these requirements and the corresponding reporting format.
Using an LEI helps authorities identify the same legal entity consistently across countries and platforms.
You can learn more about what an LEI is and how it works.
Does the LEI Have to Remain Active for the Entire Loan Period?
ECSPR does not create a general requirement for a company to keep its LEI active throughout the entire term of a crowdfunding loan solely because the loan remains outstanding.
However, this does not mean that a company should simply allow its LEI to lapse after receiving the funding.
An LEI provides a global identifier for a legal entity. An active ISSUED status shows that the entity maintains its LEI record and keeps its reference data within the LEI system's renewal cycle.
If the company does not renew its LEI, it keeps the same LEI code, but the registration status changes to LAPSED. In that case, the annual renewal process no longer confirms that the reference data remain current.
Keeping an LEI active helps a company maintain current and verified LEI reference data. Financial institutions, investors and other counterparties can then use that information when they need to verify the company's identity and key reference data.
Anyone can check an LEI, its current status and associated reference data in the GLEIF Global LEI Index.
For this reason, LEI System recommends keeping the LEI active and its reference data up to date even after the company has obtained crowdfunding financing. If your LEI has lapsed or its renewal date is approaching, you can renew your LEI through LEI System.
Why Use an LEI Instead of a Company Registration Number?
National company registration numbers work well within their own jurisdictions, but the European crowdfunding market crosses national borders.
Each country maintains its own business registers, registration number formats and legal entity structures. The LEI provides one standardised global identifier that financial market participants can use across jurisdictions and platforms.
This becomes particularly useful in crowdfunding. According to ESMA's latest available market data, approximately 8% of funding across providers in 2024 came from cross-border investors. Some national markets showed a considerably stronger international dimension.
The LEI ultimately helps the financial system answer a simple but critical question:
Who is who?
But the LEI system can go further than identifying an individual legal entity. LEI Level 2 data can also provide information about an entity's direct and ultimate accounting consolidation parents, helping answer another important question: Who owns whom? You can learn more about LEI Level 2 data and corporate relationships.
What Should You Do If a Crowdfunding Platform Asks for an LEI?
First, check whether your company already has an LEI. Each legal entity receives one LEI, and the same 20-character code remains associated with that entity even if its registration status later changes to LAPSED. You can search for your company and check its LEI status directly through LEI System.
If your company does not yet have an LEI, you can apply for one through an LEI issuer or a Registration Agent.
LEI System lets you complete the application entirely online. We check the required company information and submit the application for LEI issuance. You can apply for an LEI online through LEI System.
If your company already has an LEI but it has lapsed or its renewal date is approaching, you can transfer and renew your existing LEI through LEI System.
LEIs Are Not Only About Securities Trading
Crowdfunding shows how the role of the LEI in the financial system extends beyond what many companies initially expect.
A business does not have to list securities or trade financial instruments to encounter an LEI requirement. It may simply want an alternative way to finance its operations.
When companies raise money through regulated financial infrastructure, authorities need a reliable way to identify which legal entity stands behind a funding project.
In EU-regulated crowdfunding, the reporting framework uses the LEI to identify a project owner that is a legal entity.
According to ESMA's latest available official market data, more than 10,000 lending-based crowdfunding projects took place in the EU in a single year. That makes crowdfunding a practical LEI use case rather than a theoretical one.
If your company plans to raise funding through a crowdfunding platform and the platform asks for an LEI, you can apply for an LEI online through LEI System.