Dear Member of Congress:
On behalf of the 362,000 members of the National Taxpayers Union, I encourage you to support H.R. 2930, the “Entrepreneur Access to Capital Act,” and H.R. 2940, the “Access to Capital for Job Creators Act.” Introduced by Rep. McHenry (R-NC) and Rep. McCarthy (R-CA) respectively, these bills would ease the regulatory constraints that are preventing entrepreneurs from finding and utilizing the capital required to get their businesses off the ground.
Early-stage entrepreneurial activity has been steadily declining in the United States, putting America’s innovation-based economy at serious risk of losing out to foreign competitors. The problem is not the result of a lack of ideas or entrepreneurs, but an inability to match potential sources of capital with investment opportunities. Recent estimates from the General Accounting Office reveal that the financial markets fell $60 billion short in meeting the demand of small businesses for financing in their formative phase. Given the important role that start-ups have played in economic dynamism and job creation, the federal government should be doing all it can to strike the best possible balance between investor protection and capital formation.
The Entrepreneur Access to Capital Act would help accomplish this goal by allowing businesses to accept and pool donations of up to $5 million without registering through the Securities and Exchange Commission (SEC), which is cost-prohibitive for many small offerings. Traditionally many small startups have difficulty securing financing due to a combination of factors including the scarcity of bank lending and the focus of most “angel investors” on larger projects. By allowing “crowdsourcing” – raising small amounts of money from a large group of investors – H.R. 2930 would unlock a potent source of capital to help turn entrepreneurial ideas into centers of economic activity.
In order to further harness the power of small investors, the Access to Capital for Job Creators Act would help emerging companies attract resources by eliminating the current ban against general solicitation. The SEC has interpreted this prohibition very narrowly, only allowing the company to contact investors or intermediaries with whom they have a preexisting, substantive relationship. This not only eliminates crowdsourcing as a strategy, but severely hampers entrepreneurs’ ability to attract investors of any means, however modest. By thoughtfully reconstructing this regulatory barrier, H.R. 2940 would open up a variety of marketing techniques to connect start-ups with latent investors.
By passing the Entrepreneur Access to Capital Act and the Access to Capital for Job Creators Act, Congress can bring outdated securities regulation into the modern world of the Internet and social networking while also jump-starting America’s economic engine. For these reasons, NTU supports H.R. 2930 and H.R. 2940, and any roll call votes on these bills will be significantly weighted in our annual Rating of Congress.
The U.S. Chamber of Commerce, the world’s largest business federation representing the interests of more than three million businesses and organizations of every size, sector, and region, strongly support H.R. 1965, “To amend the securities laws to establish certain thresholds for shareholder registration, and for other purposes;” H.R. 2167, the “Private Company Flexibility and Growth Act;” H.R. 2930, the “Entrepreneur Access to Capital Act;” and H.R. 2940, the “Access to Capital for Job Creators Act.” These bills would enhance capital formation needed to build new businesses, expand existing businesses and create jobs. The Chamber urges the Subcommittee to report these bills to the full House in the near term.
H.R. 2940 would remove the prohibition on general solicitation or general advertising for
certain small issuances, provided that all purchasers of the securities are accredited investors. This bill would give flexibility to companies to raise capital from accredited investors who do not need heightened protections from the Exchange Act’s provisions.
Read full statement: http://www.centerforcapitalmarkets.com/wp-content/uploads/2010/04/110920_HR1965_HR2167_HR2930_HR2940_SmallBusinessCapitalFormationBills_Garrett_Waters-9.20.2011.pdf
Dear Congressman McCarthy:
On behalf of the Small Business & Entrepreneurship Council (SBE Council) and its nationwide membership of 100,000 small business owners and entrepreneurs, we are delighted that you have introduced H.R. 2940, the Access to Capital for Job Creators Act. SBE Council strongly supports this timely piece of legislation.
Even in good economic times, access to growth capital is a significant challenge for many entrepreneurs. Economic and entrepreneurial growth throughout the world, along with the fact that many nations have enacted policies to aggressively attract capital, has put increased pressure on U.S. entrepreneurs. Therefore, it is vital that our legislators and policymakers work to identify and remove impediments that hinder capital formation as well as the entrepreneur's access to potential investors. Indeed, outdated regulatory barriers are making it more difficult for entrepreneurs to approach prospective funders to secure critical resources for growth.
The Access to Capital for Job Creators Act is a long-overdue solution that will widen the pool of potential funders for entrepreneurs. By lifting the antiquated and onerous "solicitation prohibition" contained in Rule 506 of Regulation D of the Securities Act of 1933, promising enterprises can approach "accredited" investors outside of their personal networks to seek and secure the capital they need to compete and grow. In our modern economy where information and transparency is prevalent, and where many more people invest than what was the case during the depression-era, the rule modification makes sense.
Our economy will improve once entrepreneurs are provided the tools, opportunities and incentives they need to hire and invest. While Washington must work on an array of issues to improve optimism and the business environment, H.R. 2940 is an important step that addresses a critical challenge for many entrepreneurs.