Small business groups urge U.S. senate leaders to advance crowdfunding legislation
The internet has revolutionized the way people do business and that includes the way businesses are funded. Crowdfunding – once the pet project of struggling musicians and artists is gaining steam as a viable funding option for many small businesses. Now business groups are asking Congress to help keep this lifeline working, particularly in a time of the big bank credit crunch. The following is an excerpt of the press release and where you can find more information on this legislation:
A coalition of the nation’s most influential organizations representing small business owners and entrepreneurs delivered a letter to U.S. Senate leaders on February 28, urging them to work together to bring crowdfund investing legislation to the Senate floor for a vote. In the letter addressed to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY), the groups note that crowdfund investing legislation passed the U.S. House 407-17, and President Barack Obama expressed his support for the legislation through a Statement of Administration Policy as well as in his Startup Legislative agenda.
Crowdfund investing platforms will allow entrepreneurs who lack access to funding networks the opportunity to bring their business ideas directly to investors through regulated, online platforms. As the groups note in the letter, “Americans will have the opportunity to invest in small businesses in their local communities, or support entrepreneurs in rural areas where business formation is critical to sustaining those communities.” The letter points out that capital access remains a serious challenge for startups and growth-oriented businesses, and without “adequate sources of capital, the economy will continue to underperform, and the recovery will remain less than robust.” Funding streams “remain cautious, locked or tentative,” write the groups.
With respect to crowdfund investing legislation, state regulators have engaged in a campaign of “fear and fraud,” which has deprived Senators from learning the facts about how crowdfunding currently works through gift-based platforms, and how technology — and a new regulatory framework – will play a central role in rooting out potentially bad actors on crowdfund investing platforms. At the March 6 hearing, Senate Banking Committee members heard balanced testimony. However, and as noted above, SBE Council continues to meet with Senate staff to bring them the facts.
As the groups note in their letter:
“On these platforms, investors will dynamically engage with other investors to vet business ideas and fund those businesses that have significant promise. Crowdfund investing platforms will be open and transparent, and operate under a new regulatory framework. The platforms will protect investors by utilizing proven technologies and tap into ‘the sunshine’ of social media. This is what has made gift-based crowdfunding so successful, and why crowdfund investing has been a major success in other parts of the world. Entrepreneurs looking to raise capital will be required to provide significant financial information to potential investors, as well as withstand the scrutiny of the crowd in regards to the feasibility of their business plans and models.”
“Capital is the lifeblood of our economy, and without it small business owners and entrepreneurs simply cannot generate the new jobs, breakthrough innovations and economic impact that are necessary for bringing our nation back to sustained growth,” the groups conclude in the letter.
The letter was signed by Harry Alford, President & CEO, National Black Chamber of Commerce; Kristie Arslan, President & CEO, National Association for the Self-Employed; Roger Campos, President & CEO, Minority Business Roundtable; Allen Gutierrez, National Executive Director, The Latino Coalition; Barbara Kasoff, President & CEO, Women Impacting Public Policy (WIPP); Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council; and Todd McCracken, President, National Small Business Association.
To review the various crowdfunding proposals being proposed with some in play please click here.