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Washington Watch - March 7, 2012

NASE Urges Senate Action On Crowdfunding Bill

Entrepreneurs exploring self-employment are continually faced with the challenges of raising capital. In fact, in past member surveys the NASE has found that nearly half of our members have used personal savings as the primary source of financing for their business. This practice continues to re-enforce the challenges that entrepreneurs face when raising capital for their small business. They have very few avenues to pursue funding and capital formation, like crowdfunding, provides an untapped resource for those entrepreneurs without significant personal savings to launch their business. 

Recently, the Senate Committee Banking, Housing, and Urban Affairs held a hearing highlighting the continued struggle in securing capital and how capital formation, such as crowdfunding, can help support the self-employed and budding entrepreneurs looking to translate an idea into a product or service for sale in the global market.   

Last week the NASE, along with several partner organizations, formally requested Majority Leader Reid and Minority Leader McConnell to move crowdfunding legislation in the Senate. The U.S. House of Representatives has already passed bipartisan legislation, H.R. 2930, “Entrepreneurs Access to Capital Act”, and two Senate bills await action, S. 1791, “Democratizing Access to Capital Act of 2011”, introduced by Senator Brown and Senator Merkeley’s, S. 1970, “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2011.” All three of these pieces of legislation would allow for the SEC to exempt businesses seeking crowdfunding from certain provisions of the Securities Act of 1933 and cap the funds raised at $1 million annually. S.1970 includes more robust language aimed at investor protection which not only makes good policy but also, the NASE believes, protects the integrity of crowdfunding in perpetuity. We strongly support these three pieces of legislation and encourage the Senate to act quickly.  

The NASE hopes that in the course of the legislative process, the crowdfunding legislation will not only find additional Senate champions but will be free from restrictive requirements that would danger this unique and agile stream of capital formation.

What Health Benefits Will Be Covered By State Exchanges?

The NASE supports the creation of new health insurance marketplaces where small-business owners can get access to more options for coverage. However, our top concerns for micro-businesses are the cost of health coverage and flexibility within the new exchanges. The design of state exchanges will have a direct impact on both those factors. 

There are a number of categories that the exchanges will be required to cover, including maternity and newborn care, hospitalization, emergency care and mental health services. Currently, the federal goverment has yet to specifiy the level of coverage within the categories.

Last year, Health and Human Services issued a notice that will allow states to work with insurers to control benefits within the categories.

States have a number of options when it comes to choosing which carriers will offer these benefits. This includes selecting any of the three largest small-group health plans in the state, any of the three largest health care plans for state workers, any of the largest federal employee plans or the biggest commercial non-Medicaid health maintenance organization in the state

The decision has met with opposition from states, who will be required to cover costs of benefits not mandated by federal law and who say the decision is too complex to be completed by later this year. Other groups argue that the federal government should have laid out uniform benefits required by each state.

The policy is set to go into effect in 2014 and last for two years before these requirements will be revisited.

Senate Introduces Business Funding Bill

Senators Mary L. Landrieu, D-La., and Olympia Snowe, R-Maine, Chair and Ranking Member of the Senate Committee on Small Business and Entrepreneurship, introduced legislation last week aimed at increasing access to capital for small businesses and entrepreneurs.

The bill would modify the Small Business Investment Company (SBIC) program to raise the amount of SBIC debt the Small Business Administration (SBA) can guarantee from $3 billion to $4 billion. It would also increase the amount of SBA guaranteed debt a team of SBIC fund managers who operate multiple funds can borrow. These two provisions are part of the Startup America Legislative Agenda that President Barack Obama sent to Congress on January 31, 2012.

The NASE is a fervent supporter of federal small-business programs that have a proven track record of efficiently aiding very small businesses and the self-employed, such as the SBA Office of Advocacy, Small Business Development Centers and the SBA Microloan Program. SBICs are privately owned and operated funds that make long-term investments in American small businesses. They are licensed and regulated by the SBA.

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