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Trouble getting a loan? Congress considers crowdfunding as a solution for business owners

Trouble getting a loan? Congress considers crowdfunding as a solution for business owners

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Published by: Crowdsourcing.org on Mar 18, 2012
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02/03/2013

 
By  Adrienne Burke| Yahoo! Small Business Advisor – Thu, Mar 8, 2012 4:30 PM EST
One of the top complaints raised by business owners in the recent Yahoo! Small Business survey was about a lack of accessto capital. It’s tough to grow your business when the economic climate and banking rules are standing in the way of gettingloans.Loosening rules on “crowdfunding” is one option the government is currently considering to address this problem.Entrepreneurs and artists have used online crowdfunding platforms for a few years now to drum up cash from friends,family, and strangers. It’s illegal in the U.S. to sell shares of stock to unaccredited investors this way, so people who supportstartup businesses via crowdfunding are essentially donating their money. The most they’ll get in return is a “thank younote” or a trinket bearing the company logo.It might sound like a quaint or even ineffective way to get cash to run your business. ButKickstarter.com, one of the better-known crowdfunding platforms, helped creative projects raise nearly $100 million last year. The company says ithelped more than 30 product design projects raise six figures in 2011. And while Kickstarter is exclusive to "creative"projects, it's just one of dozens of crowdfunding platforms.IndieGoGo, considered crowdfunding's pioneer, enablesfundraising for just about anything. And other sites serve niches such asstartup businesses,inventors,scientists,mobile apps development,social entrepreneurship,Christian-oriented ideas, andmore. Now the Federal government is considering making it possible to not just donate, but actually invest in a company this way.The House passed a bill in November that would let proprietors sell small stakes in their businesses through crowdfunding.The Senate is currently considering variations on that bill.Testifying at a Senate hearingon “spurring job growth thorough capital formation while protecting investors” earlier this week, Tim Rowe, who runs a startup incubator in Cambridge, Mass., said, “We have the potential to really radically changethe system by which we create new companies in this country.”Rowe told the Senators that crowdfunding legislation could make it legal for neighbors to help neighbors start small, local businesses like restaurants, plumbing, or construction. “Someone in your community will start a catering business. They’llgo to Facebook and ask their friends, ‘Will you back me? I need to buy an oven.’ This is where it’s really going to hit theground running.”Kenneth Yancey, CEO of the business mentoring association SCORE, and Kristie Arslan, president of the National Association for the Self-Employed, are among small business leaders who would like to see crowdfunding legislationpassed. Says Yancey, “You’d be shocked to know that the SEC governs who can invest and how much in terms of realdollars as well as a percentage of their own net worth. This law kind of changes those rules making it easier for qualifiedinvestors to invest in small companies.” Arslan points out that 78 percent of the small business population is comprised of self-employed people. “They don’t need
Trouble getting a loan? Congress considers crowdfunding as a solution fo...http://smallbusiness.yahoo.com/advisor/trouble-getting-a-loan--congress...1 of 23/19/2012 5:03 AM

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