Crowd Funding and the JOBS Act

With all of the talk about the changes coming to crowd funding as a result of the JOBS Act, it is important for entrepreneurs to understand what the act entails. JOBS stands for Jumpstart Our Business Startups and the act is geared towards entrepreneurs who are raising funds for their next business venture.  Once the Securities Exchange Commission releases its regulations for the JOBS Act, the act will do three things for entrepreneurs:

1. The act will allow entrepreneurs to attract professional investors to their business concept.

2. The act will allow entrepreneurs to raise larger funds with investors that have higher annual incomes.

3. Instead of the entrepreneur promising a tangible reward for donation (which is basically like selling products), the entrepreneurs will be able to distribute equity stake in their business. 

This act will no doubt will be greeted with mixed feelings because of the regulations and policies that will be set forth to protect investors.  The banking institutions may also see a drop in business loan requests, which may allow the business loan process to be more feasible and accessible to newer entrepreneurs.  All in all, the JOBS Act was created because the government saw the billions of dollars being donated to great business concepts.  As a result, our political leaders felt that crowd funding offers an enormous opportunity for our country to create jobs within small businesses.  As we move forward, we all will be watching for the success or failure of this act.  Either way, it will have an interesting impact on our economy and our outlook on small businesses.  

To read the actual act, visit www.gpo.gov.  If you would like to keep up with the progress of the Securities Exchange Commission on its drafting of rules and policies for the JOBS Act, visit the JOBS Act section at www.sec.gov.  

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