The Nova Scotia Securities Commission has outlined new rules that would govern how start up and small businesses raise capital using crowdfunding.

The province is one of several in Canada proposing regulations for equity crowdfunding.

Crowdfunding involves funding a project or venture by raising many small amounts of money from a large number of people, typically through the internet.

It has emerged in recent years as a successful way for small and start-up businesses to raise money.

Decision based on demand

Abel Lazarus, a securities analyst with the Nova Scotia Securities Commission, said their decision to bring in regulations is based on demand.

"There's been quite a bit of feedback from folks who are looking to raise capital. They're having a hard time raising capital and some of the costs to raise that capital are extremely prohibitive," he said.

"Some of those costs involve lawyers, investment bankers, accountants, so they're not very large entities looking to advance their companies."

The NSSC stresses the new rules would not impact raising donations through crowdfunding.

Start-up businesses would be allowed to raise a maximum of $300,000 per year with the offering solicited through an on-line portal.

They must have a Canadian office and investors would be limited to a $1,500 maximum.

A final version of the new rules is expected by the end of the year.