Two Small Biz Finance Bills OKdMarch 16, 2016
On March 2, 2016, the House Financial Services Committee approved two pieces of legislation aimed at increasing access to capital for small businesses. The first piece of legislation, the Helping Angels Lead our Startups (HALOS) Act (H.R. 4498) was introduced by House Small Business Committee Chairman Steve Chabot (R-Ohio). While the second bill, the Main Street Growth Act (H.R. 4638) was introduced by Rep. Scott Garrett (R-N.J.). Both bills seek to make investing in small businesses easier and more attractive for potential investors.
The HALOS Act was approved unanimously by the committee. The measure is designed to make it easier for businesses to notify potential investors of their offerings as well as provide a statutory definition for “angel investor group.” The legislation would further require the Securities Exchange Commission (SEC) to revise the Regulation D rules regarding general solicitation. It would allow certain entities including angel investor groups to sponsor events and where communications made on behalf of issuers would not run afoul of the prohibition on general solicitation as long as they met certain criteria. Generally, those criteria require that advertising for the event not contain information about specific offerings, the sponsors remain neutral and limited specified information about the offering is distributed.
The Main Street Growth Act was approved by the committee by a partisan 20-17 vote. The legislation seeks to make small business offerings more attractive to investors by creating “venture exchanges” which will bring together buyers and sellers for of venture securities. New exchanges would be created or existing exchanges will be allowed to elect to have a tier of their exchange dedicated as venture exchanges. Importantly, the bill will also exempt these sales on the venture exchanges from reporting requirements which will make the securities much more liquid and attractive to investors.
NSBA supports strong steps towards increasing access to capital for small businesses. Traditional sources of capital for small businesses have not returned to pre-recession levels of lending. Without adequate access to capital, small businesses can not compete, grow and add quality jobs to the economy. In a recent NSBA survey, 25 percent of members indicated that they would like to hire new employees in the next 12 months, however more than a quarter of members indicate that they do not have access to adequate financing. NSBA has long advocated for removing barriers and finding new and efficient opportunities to capital access for small businesses. These commonsense reforms remove red tape and make sure that buyers and sellers of securities can easily get together and ensure that capital flows to America’s small businesses.