Former President Ronald Reagan called them the “forgotten heroes of America”: small business owners who make up a startling majority of job creators, employers and exporters. But these local, home-grown companies often meet huge financial challenges as they try to get their businesses off the ground. From legal advice to proper underwriting, entrepreneurs are facing many challenges raising the equity they need to make their American dream come true. That’s where crowdfunding may help. Simply put, the promise of crowdfunding can help small business, and small business drives the American economy.
So Who Exactly Is A “Small Business Owner”?
Crowdfunding for Your Business
Small businesses as a rule have fewer than 100 employees, yet they represent 99.7% of employers and employ more than half of all private sector workers – some 54.9 million Americans! These are the owners of the local family restaurant down the road, the entrepreneur trying to open a franchise in a small town, or perhaps a person with a big idea for a new software product or service.
Every year, small businesses make up between 60-80% of net job creation in America; for companies who have been in business for about two years, it takes just $17,000 (approx.) in new equity to create a new job. Furthermore, these jobs are not only service or sales positions: small business holds a whopping 39% of jobs in the technology industry.
But Yet, The Status Quo Was Not Working.
When angel investors and venture capital firms invest in small businesses, owners are sometimes forced to make short-term decisions in the best interest of the investor versus the longer-term health of the business. Additionally, another source of potential capital from banks has become a shrinking option for entrepreneurs looking for loans, and access to capital has become increasingly sparse, particularly in Georgia; a state that had more bank failures than any other state during the recent financial crisis. This means that these small businesses are often losing opportunities to capitalize on new markets, channels or products simply because they do not have access to capital that can help them grow their businesses over the longer term.
The Light At The End Of The Tunnel
The good news is, with the new legislation passed in Kansas, Georgia, Wisconsin and Michigan businesses without sufficient working capital no longer have to play by Wall Street’s rules. With the beginning of social investing – more commonly called crowdfunding – non-accredited investors can now help finance local businesses that they care about as residents of states who have passed legislation allowing intrastate exemptions for private investment in for profit businesses.
Crowdfunding represents a great opportunity to create a positive effect on communities at the local level. It’s great for social investors who want to do some good by supporting a local business, cause or project. Plus, it’s great for entrepreneurs, who finally have an investor on their side, instead of just out strictly for financial gain. Crowdfunding puts the American Dream within reach for the small businesses that are the backbone of the nation.