04/10/17

House Passes Bill to Create More Capital for Startups and Rural Small Businesses

The Supporting America’s Innovators Act of 2017 (HR 1219) passed the House of Representatives last week with a vote of 417 in support and 3 against. The bill now moves to the Senate for review.

The bipartisan legislation would provide increased access to capital for small businesses and startups by making it easier for investors to pool funds together to support them. The bill also promotes rural entrepreneurship through incentivizing venture capital funds for rural-state small businesses. An amendment to the Investment Company Act of 1940, the Act would change the number of investors allowed in a venture capital fund from 100 to 250, as long as the fund does not have more than $10 million in total investor capital.

The legislation is a “common-sense bill that will remove needless and outdated regulations,” said Chief Deputy Whip Patrick McHenry (R-N.C.), the bill’s sponsor. According to McHenry, the new regulatory framework will encourage the development of more innovative forms of capital to help businesses grow and create jobs.

The Senate Banking Committee unanimously approved a similar bill last month, signaling the likelihood of HR 1219’s approval. According to representative Maxine Waters (D-Calif.), the bill solves the problem of capping angel investors from pooling resources to fund startup businesses.

“If more than 100 people want to invest, the fund is forced to exclude some of them from the deal to avoid registration and regulation as a quote ‘investment company’ … under the securities laws,” Waters said. “That means investors willing to commit capital are being turned away and startups are losing out on important early stage funding.”

House Majority Leader Kevin McCarthy (CA-23) joined Congressman McHenry last week for a bipartisan roundtable commemorating the fifth anniversary of the Jumpstart Our Business Startups (JOBS) Act. The group discussed ways to build on the success of the Act, which is designed to promote entrepreneurship and job creation through reducing regulations on companies going public and to make it easier for startups to raise capital.

“The rate of new business formation has declined and startups and small businesses still struggle to get the capital they need to grow and thrive. The Innovation Initiative is our answer to this challenge to build upon the success of the JOBS act. By reforming how government works and empowering private sector innovation, we can recreate the magic of the JOBS Act across all sectors and in every region of America, creating economic opportunity accessible to all,” McCarthy said.

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About the author

Melanie King
Melanie King is Lendio’s Director of Public Relations. A lover of the written word, she creates content to inspire business owners and help them discover new ways to grow. She can often be found adventuring in Utah’s picturesque outdoors with her four energetic children.

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