Today, we can do more to increase the amount of capital that flows into the hands of entrepreneurs at every stage in the growth of their companies.
Many small businesses need traditional business loans or SBA loans from banks to start or expand their business, but the biggest job creators – startups and high-growth firms – tend to have different capital needs. We have an economic imperative to make sure we support these firms through creating an environment that helps them grow and succeed. That means tax cuts, like the President’s plan to cut payroll taxes in half for nearly 6 million small businesses, which Congress could pass right now. It also means making sure firms have access to capital markets to help facilitate growth at every stage.
In September, when the President announced his American Jobs Act, he called on Congress to take steps to help small businesses raise the funds they need to innovate and grow. He highlighted specific steps to allow small businesses to raise money through “crowdfunding” and expanded “mini-offerings,” and to help reduce upfront costs for entrepreneurs and small businesses that want to take their companies public. He urged Congress to work on a bipartisan basis to develop these ideas in ways that will help our small businesses while continuing to protect American investors.
Over the past few months, we have begun to make real progress. Members on both sides of the aisle have supported legislation consistent with the ideas that the President called for. Legislation has passed the House of Representatives with overwhelming bipartisan support. And today, these issues were highlighted at a Senate Banking Committee hearing.
Already, nonprofits have harnessed the power of online fundraising and social media to help meet their mission. In a similar way, we can allow entrepreneurs to raise money from many small-dollar investors, while also modifying the rules to build in investor protections.
In addition, small businesses owners who are seeking private capital of less than $5 million are currently exempt from a variety of regulations. The President has called for raising that limit to up to $50 million in order to make it easier for small companies to raise the capital they need to grow.
Making it easier to raise private capital from investors is only one piece of the puzzle. We are also taking a hard look at ways to encourage small companies to “go public” because research shows that most job creation for public firms occurs after they go public. By phasing in certain regulations for small, high-growth firms, we can provide a transition period to help these companies ramp up to the full costs of being public.
Overall, efforts like these could help improve liquidity for entrepreneurs, and help jump-start the innovative American companies of tomorrow. At the same time, we need to ensure that as we develop these initiatives we are taking necessary measures to ensure that investors are protected – and the Administration will continue working with Congress to achieve this outcome.
Over the past three years, we have made great progress in helping small businesses. The President has signed into law 17 tax cuts for small businesses, from greater expensing provisions to the President’s signature call to eliminate capital gains taxes on certain investments in small businesses. Going forward we must build on this effort, including by making permanent the President’s elimination of capital gains taxes on those investments.
We launched Startup America, a White House initiative to create the best possible climate for high-growth entrepreneurs across the country. We strengthened key programs, like the Small Business Investment Company (SBIC) program, which just had a record year of helping over 1,000 businesses get $2.6 billion in capital, and created new vehicles like SBA’s first Impact Investment Fund, which recently launched in Michigan. We continue to look for innovative ways for entrepreneurs to get the funds they need, including capital from investors. Such efforts are particularly crucial since so much traditional funding has dried up during these challenging economic times.
The President, both of us, and leaders across the private sector understand that “one size doesn’t fit all” when it comes to helping small businesses, especially startups and high-growth firms. Let’s make sure they can get access to the kinds of capital they need to grow and create the jobs we need now.