A bill approved by the Virginia General Assembly would exempt businesses from federal regulations to crowdfund as a means to raise capital.
Opportunities to raise capital may expand for small business
owners, as new crowdfunding legislation is under review by Governor McAuliffe.
The bills, sponsored by Delegate Scott Taylor and Senator
John Edwards, would allow Virginia small businesses to use crowdfunding
platforms and accept capital from individuals in addition to accredited
investors.
“Small
businesses and startups are the backbone of our economy and create well more
than half of new jobs in Virginia,” Nicole Riley, NFIB Virginia state director,
said in a statement. “NFIB, the voice of small business in Virginia, supports
this proposal to allow Virginians to invest in small businesses through
crowdfunding websites. It would give entrepreneurs access to more financial
resources and provide oversight that would give confidence to investors.”
The legislation was unanimously approved by the House of
Delegates and State Senate in late February.
Crowdfunding in exchange for equity is a complicated issue
because the Securities and Exchange Commission has yet to issue finalized rules
and regulations at the federal level.
In general, only accredited investors may invest in a
company for equity. Accredited investors can be banks, insurance companies and
private businesses with assets totaling more than $5 million and others. This
bill changes regulation, allowing individuals of the Commonwealth of Virginia
that may not meet the requirement of “accredited investor” to invest in a
company for equity within its explicit limits.
While the legislation will make it easier for businesses to
raise money, there are caps. According to the bill, an individual may not
contribute more than $10,000 in exchange for equity unless they are an
accredited investor. In addition, the exemption only applies up to $2 million
raised by a company through crowdfunding.
Should the Governor sign the legislation, NFIB/Virginia will monitor the
State Corporation Commission’s work to implement the policy.
What Crowdfunding Can
Do For Small Business
Proponents of the bill have said that providing more capital
to businesses to invest or expand will also lead to job growth in the state.
Crowdfunding has quickly become a popular fundraising method
for small businesses and startups. Several different types of crowdfunding
platforms have popped up online, including those for product development,
equity investment and more. These online resources have been a haven for
growing businesses.
