JOBS Act and Your Small Business
Bipartisan support and a presidential signature.
Getting Washington to agree on anything these days takes a Herculean effort. Given that this is an election year, both Democrats and Republicans are looking for ways to show the voting public that they are, indeed, striving to look after everyone’s best interests. In the case of the JOBS or Jumpstart Our Business Startups bill signed into law last Thursday by President Obama, both sides can now claim that they are helping beleaguered small businesses.
The JOBS Act is all about helping capital-hungry small businesses find new funding options, making it easier for these companies to go public. Essentially, small businesses will have access to a much larger pool of investors when the rules take effect. The Securities and Exchange Commission is writing the rules for how this legislation will be enforced and has until January 2013 to complete its work. If completed earlier, then the Act will be in place allowing borrowers and lenders to work together.
Making Crowdfunding Easier
One of the most significant aspects of the bill is its crowdfunding provision. According to Intuit crowdfunding is described as “individuals coming together to support and directly fund projects by other individuals and organizations.” Money comes in through donations, philanthropy and sponsorship, with people currently using such popular platforms as Kickstarter, RocketHub, MicroVentures, Profounder and Quirky — to name a few — to help fund small businesses.
However, these platforms are limited — the JOBS Act seeks to make it easier for people to raise as much a $1 million in small stake investments from unaccredited investors with no need to register with the SEC. Borrowers won’t be required to provide audited financial statements either, one reason why SEC chairwoman Mary Schapiro has opposed the law.
The 13 crowdfunding platforms currently in operation have formed a coalition — the Crowfunding Accreditation for Platform Standards (CAPS) program that is part of Crowdsourcing.org advancing crowdfunding. CAPS is a self-regulatory organization that hopes will collaborate with the SEC on developing industry standards.
Concerns of fraud with crowdfunding is small or nonexistent, if you consult the Crowdsourcing infographic. That chart reveals that three platforms — Kickstarter, Crowdcube and Prosper — have collectively lent out more than $430 million with zero instances of fraud.
Notably, the CAPS infographic shows that America’s small businesses create 65 percent of all jobs and contribute 50 percent to our nation’s gross domestic product. However, small businesses typically have difficulty obtaining funding, receiving just 17 percent of the monies of the financing available through bank loans, venture capital firms and angel investors. Come 2013, small business lending should ease, probably a lot sooner as we have an important election coming up this November.