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Congress Gets Crowdfunding (finally)

By Rolfe Larson on November 28, 2011

You might find this surprising, but last week a bi-partisan US House passed a bill that actually had some substance to it.  One that could actually help entrepreneurs and small business owners.  

Entrepreneur Access to Capital Act

The bill, called the Entrepreneur Access to Capital Act, passed the House 407 to 18.  That’s the kind of vote you expect for apple pie appreciation month.  This bill would encourage small businesses to use crowd funding to raise capital, by eliminating many of the security fraud regulations designed to protect investors from unscrupulous scam artists.  If passed by the Senate and signed by the President (which seems quite likely), the law would allow a business owner to raise up to $2 million from individual investors who put it a maximum of $10,000 per person.

Read more about it from NPR at: http://n.pr/w4tc2g

Would this be a good thing?  For web-savvy entrepreneurs who want to do more than just ask friends and family to get startup capital, this could be a great new source of investment funds.  Currently, you’d violate SEC (Securities Exchange Commission) regulations if you tried to raise money this way, and find yourself in deep, deep hot water.

On the other hand, I’m sure there are con artists watching this legislation very carefully.  What the Internet offers in access to so many possibilities, it also often lacks in accuracy and accountability.  The SEC currently protects small investors from being drawn into fraudulent offers; this law would prevent them from doing so.  Almost every day we hear about honest, well-eduacated people getting hoodwinked out of their savings by shysters.  This act could offer them a new way to do so.  Time will tell how serious a problem that will be.

That said, every entrepreneur and small business owner looking for capital will want to watch this legislation carefully.  It might just help you move forward with your business plan!

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For more resources, see our Library topic Business Planning.

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Rolfe Larson provides consulting and training in areas such as strategic planning, market research, feasibility analysis, business planning, marketing, and implementation strategies.
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