Crowdfunding Small Businesses: Update on Title III of JOBS Act

MGN Online

RENO, NV - In 2012, the "Jumpstart Our Business Startups" act was passed through Congress with overwhelming support. A provision in that act allows entrepreneurs to crowd source up to a million dollars a year and that's a game changer when it comes to getting into the investment game.

The provision allows startups and small businesses to raise money from non-accredited investors. Brantly Compton, CEO of the crowdfunding site, Move Your Mountain, says this will improve the access to capital for these new businesses.

"The business side of crowdfunding could basically become it's own industry," he said. "It's going to go from about 7 1/2 million people who can invest now to about 150 million people who can invest now. It's going to open the game up completely to small business."

Compton says once Title III of the JOBS Act goes into play, it will reduce the time and cost of starting or expanding a small business.

"It's going to allow the average business owner to go out and raise money when before they couldn't even get in the game."

But the Securities and Exchange Commission has delayed the release of the regulations making them more than 700 days past the deadline the law mandated that the crowedfunding rules be released.

Right now small businesses can raise some money through sites like Kickstarter, but only if they give investors something back in exchange like a prototype. But through Title III, entrepreneurs will be allowed to crowdfund up to a million dollars a year and give investors equity; something that's never been allowed before.

"It's just going to open up to people who maybe couldn't go to a bank before. They had a good story, they had a good product, or they had a good skill, but they weren't strong enough to go to a bank. But this gives them a chance for the community to believe in them."

Compton says that's important for the growth of cities like Reno that have up and coming pools of talent.

"This is going to open the door for young people to tell their story, and for lots of people to give a little bit of money so nobody really has a massive risk. I think it's a game changer."

In December 2014, the SEC gave a projected target of October 2015 of it would be finalizing the JOBS Act mandates. Because it will take about 60 days for the regulations to be passed and put into law, small business hopefuls can expect to begin crowdfunding by 2016.