IPO lite? SEC rule change gives small businesses a new fundraising option.
On Wednesday, small businesses got a new way to raise millions of dollars in investments without going public.
The U.S. Securities and Exchange Commission听听to a little-used regulation that will now let companies sell up to $50 million in securities to outside investors every year.
鈥淭hese new rules provide an effective, workable path to raising capital that also provides strong investor protections,鈥� said SEC Chair Mary Jo White.听 鈥淚t is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.鈥�
The change creates a sort of 鈥淚PO Lite鈥� 鈥斕齛 way to raise a significant amount of capital for businesses that may be well established, but not ready, or willing, to be traded on the stock market.
Until now, what鈥檚 called SEC Regulation A only allowed private companies to raise $5 million annually. Of that, only $1.5 million could come from current stockholders and the company would have to pay fees in every state in which it intended to sell shares.
Congress cleared the way for Wednesday鈥檚 vote when it passed President Obama鈥檚 2012. The act required the SEC to work on new regulations that help small businesses get access to financing.
Steve Sadler, CEO of Allegiancy, a Richmond, Virginia-based commercial real estate company, has been an outspoken proponent of what鈥檚 being called Regulation A+. His company raised money under the old and Regulation A provisions, and he says it intends to seek an additional $20 million in funding under the new regulations 鈥� which go into effect in 60 days.
鈥淩eg A+ is all about opening doors for small businesses who previously couldn鈥檛 access the capital they needed to grow,鈥� Sadler said听. 鈥淔or too long, the equity markets have been broken and have kept smaller, promising companies on the sidelines. Reg A+ is about creating jobs and new opportunities. And it鈥檚 about giving regular folks access to investments that only a handful of venture capital and private equity bigwig investors have enjoyed up until now.鈥�
Doug Gross is a staff writer covering personal finance for听. Follow him on Twitter听and on听.
