The Entrepreneur Access to Capital Act Passes

The Entrepreneur Access to Capital Act, otherwise known as the H.R.2930, was passed by the House of Representatives earlier this month. While the bill in its current form is not out of the legislative woods yet, this is a significant boom to entrepreneurs and small businesses across America

So what’s so great about it? In simple terms, it allows small commercial enterprises, such as individuals with ideas or small businesses, to utilise crowdfunding over the internet by selling non public-securities to the public through “social media solicitations” – essentially asking for money in exchange for some promise of return at a later date, over the internet. You can read more about investing in startups online here.

Online microfinancing had previously been the preserve of charities and nonprofits. However, now that this bill has passed, a new group of ambitious individuals will soon be able to secure investment. The bill is right in line with Obama’s Jobs Act, and the White House issued a Statement of Administrative Policy shortly before the House voted, essentially securing its passage.

With this influx of new job creators seeking investment, the economy should receive a boost as Washington and the large lenders (banks) are forced to relinquish some control over the flow of money. However, one final hurdle remains. Senator Scott Brown of Massachusetts introduced the Democratizing Access to Capital Act, S.1791, which he claims is “[a] bill to amend the securities laws to provide for registration exemptions for certain crowdfunded securities, and for other purposes.” This is essentially the same objective as H.R. 2930, as it allows small commercial enterprises to get in on the crowdfunding scene. However, it has some differences: its major divergence is its cap on investments at $1,000 per person. Both bills limit the overall contributions to an enterprise at $1 million in any 6-month period.

These bills have to merge to make the final law. As usual, the senate process is much slower and the bill is still in the committee stages, while H.R. 2930 sailed through on a wave of government and public support. Merging the bills should be fairly painless as, after the capping differences, the two bills mainly compliment each other. They both move towards a standardized, regulated and safe process for investing that weeds out the swindlers and puts some warranted federal overwatch on the Wild West of online crowdfunding. Clauses that prevent conflicts of interest and put complaint proceedures in place are no bad thing. Whether or not the final, spliced bill works for its intended purpose is still only a matter for speculation, but in all likelyhood the future is bright for people with good ideas.