The U.S. House of Representatives Passes the JOBS Act to help Small Businesses Grow

March 16, 2012 at 2:12 pm

Against the backdrop of the lowest national unemployment rate in three years (at 8.3 percent), the House passed a new bill on March 8 to further boost job creation through smaller businesses. Called the Jumpstart Our Business Startups (JOBS) Act, it is a package of House bills that has the mission “to increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.” The bill focuses primarily on removing barriers for smaller firms to raise capital to expand and, ultimately, increase hiring. In particular, the JOBS Act would:

  •  Allow smaller companies to trade publicly earlier and easier.
    • Creates a new category called an “Emerging Growth Company,” which would have a lower reporting requirement for the first five years of public offering or until it becomes a large accelerated filer by the SEC definition or have more than $1 billion in annual gross revenue.
    • Raises the SEC registration threshold to $50 million, from $5 million.
    • Raises the SEC registration threshold to 1,000 shareholders, from 500.
    • Increases the shareholders permitted to invest in a community bank to 2,000.
  • Increase the pool of public funds available to small companies.
    • Allows small companies offering securities to advertise and solicit investors.
    • Removes SEC limitations that stop entrepreneurs from using resources like Kickstarter or Slow Money NC (also called “crowdfunding”) to raise equity.

The provision regarding community banks, the Capital Expansion Act, is particularly relevant, as we know that access to capital is a major issue for very small businesses. This act will give community banks more flexibility in lending to small businesses, which will in turn spur economic development at the local level. More specifically, according to a press release from Senator Robert Hurt from Virginia, the act “will reduce the regulatory burdens on small financial institutions and eliminate an impediment of raising equity capital from new shareholders without triggering SEC oversight in addition to prudential regulation.”

Unlike much of what we have seen from Capitol Hill lately, this bill received support from both sides of the aisle and from President Obama (his statement of administration policy is available here.)  The only real criticism over the bill has been that it has not gone far enough, as Representative Nancy Pelosi stated earlier Thursday.

Now the bill is off to the Senate for another vote.   “The Senate version could even go a little further than the House version, and I would also hope that we take some needed precautions on investor protection,” said Senator Charles Schumer, at a Senate Banking Committee hearing March 6th according to the AP Wire.  Let us hope that the legislators can continue to work together to promote the growth of small businesses.

Sarah Grimme, Development & Policy Associate

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Entry filed under: Economic Development, Small Business. Tags: , , .

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