Small business financing is one of the greatest hurdles any entrepreneur must face.
In 2015, we discussed a number of ways that entrepreneurs can raise the capital needed to get their companies off the ground and help them grow. We also highlighted several new laws, such as the Securities and Exchange Commission’s new equity crowdfunding rules, that is intended to benefit small business financing. In case you missed any of the posts, below is a brief recap:
SEC Crowdfunding Rules On October 30, 2015, the Securities and Exchange Commission (SEC) adopted final rules to implement equity crowdfunding under Title III of the Jumpstart Our Business Startups Act (JOBS Act). The much-anticipated rules are expected to be a game changer for startups and small businesses because it will allow them to raise money through smaller investments from a large number of people.
State-level crowdfunding While awaiting the SEC rules, more than 20 states legalized some form of equity crowdfunding at the local level. Most regulations allow entrepreneurs to solicit financing from investors who reside in the same state, subject to certain caps. Now that it has finalized its crowdfunding regulations, the SEC also proposed new rules intended to help facilitate intrastate and regional securities offerings.
Friends and Family When founders tap their own resources, friends and family can be a welcome source of capital for new ventures having difficulty securing loans or venture capital funds. Startups can often raise $50,000 to $500,000 and more through this type of financing. However, friends and family financing is not without its pitfalls, including the failure to formalize the arrangement.
Online Lending Online lending is set to outpace more traditional financing methods. In 2015, 80 percent of small-business owners went online first to search for a loan, according to the latest statistics. While the Internet can help connect companies with lenders, as with more traditional loans, it is still imperative for small businesses to do their research.
Regulation A+ Regulation A+, which took effect on June 29, 2015, is intended to provide small businesses with greater access to capital by expanding a little used exemption to SEC registration. Under the new regulations, businesses will be able to offer and sell up to $50 million of securities in a 12-month period, so long as they meet certain eligibility, disclosure and reporting requirements.
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Earlier this month, the U.S. Supreme Court issued a decision in Ames v. Ohio Department of Youth Services vitiating the so-called “background circumstances” test required by half of federal circuit courts.1 The background circumstances test required majority group plaintiffs pleading discrimination under Title VII of the Civil Rights Act to meet a heightened pleading standard […]
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