Proposal Would Give Small Businesses a New Avenue to Raise Capital

MacIver News Service | August 15, 2013

[Madison, Wisc…] Lawmakers behind a crowdfunding bill in Wisconsin say it’s a free market solution to a common problem plaguing businesses everywhere.

“There are a lot of businesses out there that are cash strapped and they’ve exhausted all their options,” Representative David Craig (R-Big Bend) told the MacIver News Service.

The problem is not a lack of options. It’s just that most of them are complicated, unfeasible, or nonexistent. Banks are very careful about lending money, personal savings only go so far, small businesses often take a few years before turning a profit, and, to small startups, government grants often come off as pie in the sky.

“They hear this stuff out there about going to the government for grants, but none of them have ever been able to do it,” Craig said.

So Craig, along with Senator Leah Vukmir (R-Wauwatosa) and Representative Chad Weininger (R-Green Bay), wanted to create another option that stresses simplicity and attainability. Their idea would allow people to invest a small amount (like a couple hundred dollars) without a lot of fuss.

This “crowdfunding” bill is currently being circulated for co-sponsorship that would allow businesses to raise capital from an unlimited number of micro-investors. Companies would be allowed to raise up to $1 million a year ($2 million if they agree to an audit), and individuals would be allowed to invest up to $5000.

These types of investments often take place on websites (called platforms) like Kickstarter and Crowdfunder. However, Craig said crowdfunding could also include more casual situations, like a large family or neighborhood all pitching in.

“We’re looking at lower-end enterprises, either startups or expansions,” Craig said.

Right now businesses in Wisconsin are limited to 25 investors before they need to go through a special registration process with the Department of Financial Institutions. That costs $1,500 for the registration and at least $30,000 for the associated legal fees, according to Rep. Craig’s office.

Craig said one goal of the legislation is to keep it as simple as possible. Oversight will include companies notifying DFI of their intentions to raise capital and platforms will need to disclose their terms on their websites.

See the press release regarding the legislation here.