The Senate appears ready to follow the House’s lead and pass legislation that would make it easier for small companies to obtain capital from investors.
Senate Majority Leader Harry Reid, a Democrat from Nevada, announced early last week that the Senate would move forward on bills “to spur small-business growth” by streamlining rules on capital-raising while still protecting investors.
The House overwhelmingly passed legislation in November that would allow businesses to use “crowdfunding”—soliciting small equity investments from large numbers of people via the Internet—as long as the total raised is $2 million or less. The bill limits individual investments in crowdfunded securities to $10,000 or 10 percent of the investor’s income.
In addition, the House raised the threshold for stock offerings under the Securities and Exchange Commission’s Regulation A from $5 million to $50 million. This would allow more companies to raise capital without registering the stock with the SEC.
The Senate Banking Committee has held two hearings on these proposals and are planning more in the next couple of weeks.
“This is something we should agree on,” Reid said. “These companies need the ability to get cash to innovate, grow, and build.
Karen Kerrigan, president and chief executive officer of the Small Business & Entrepreneurship Council, was optimistic about the passage.
“Access to capital continues to be a major struggle for small businesses and entrepreneurs. It is a no-brainer for the Senate to move forward with this package of capital formation bills,” she said. “Based on my positive interactions with Senate offices on both sides of the aisle, I believe we are on track for getting the package of capital formation bills through the chamber.”
President Barack Obama has endorsed these bills and also has proposed phasing in securities regulations for smaller companies in their first few years after going public.