Small businesses are the main sources of employment in our country. According to the US Small Business Administration, small firms:
- Represents 99.7 % of all employer firms.
- Employ half of all private sector employees.
- Pay 44% of total US private payroll.
- Generate 65% of net new jobs over the past 17 years.
- Produce 13 times more patents per employee than large patenting firms
However, there rarely are laws that benefit just small businesses. That may change with some bills passed by the House that may help small businesses to raise capital. Alix Stuart’s article discusses these in more detail.
The Small Company Formation Act (HR 1070): If you ever tried to raise capital from the public, you may have been cautioned by an attorney to watch out for SEC laws. With this bill, small companies could raise up to $50 million through a Reg A offering without spending a fortune to hire attorneys to prepare a full blown IPO. Today, small businesses are limited to $5 million, and subject to state law regulations. I remember going through one of these IPOs. The reporting and legal paperwork piled very high. However, if you think your business may benefit from this, you must be able to produce a comprehensive business plan to convince buyers that you are worth the risk. Many small businesses, if not most, do not have this level of sophistication.
• The Entrepreneurial Access to Capital Act (HR 2930): Crowd funding has become such a new phenomenon. Under this bill, small businesses can raise up to $2 million without registering with the SEC. In addition, investors would not have to be accredited.
• The Access to Capital for Job Creators Act (HR 2940): Currently under Reg D, you can only approach your family and friends. If this bill passes, a small business can approach others that do not already have a relationship with the small business. Family and friends are usually the first level of investment for new entrepreneurs, but this bill can expand the reach significantly.
• HR 1965: This really only pertains to small banks, allowing them to have up to 2,000 shareholders without being subject to SEC regulation. However, if a small bank’s regulation is lighter, then their ability to help a small business will be expanded.
It is imperative for a small business owner to keep a watchful eye on legislation that may affect them. Sometimes these opportunities only come around occasionally , so a small business owner must be vigilant. Most business periodicals can alert you to new changes.