Small-business advocates gathered at the 1871 tech hub Monday to support a bill that would allow Illinois companies to sell stock through increasingly popular crowdfunding sites.
Proponents say legislation filed last week by State Rep. Carol Sente, D-Vernon Hills, would increase access to capital for small businesses and startups while also keeping Illinois competitive with Michigan, Wisconsin and Indiana, where the practice is now legal.
Congress passed a law in 2012 that permits equity crowdfunding, but the Securities and Exchange Commission has yet to finalize rules. Some states have stepped into fill the void locally, and Sente said her bill, which would apply only to Illinois companies and investors, does the same.
“Being able to balance the needs of the business owner as well as the person investing was one thing that was important to me,” Sente said at Monday’s news conference. “I think we have an outstanding bill that will go far. I do believe that it has bipartisan support.”
Crowdfunding sites such as Kickstarter and Indiegogo allow companies or individuals to make appeals for financial support. But such sites allow supporters to receive only rewards, often a product the company is raising money to produce, not stock in a company.
Under Sente’s bill, investors would be able to buy stock in a company on a crowdfunding site, with limitations. Non-accredited investors — people with a net worth of less than $1 million and less than $200,000 in annual income — could invest no more than $5,000 per year per company. The bill, as submitted, would allow companies with audited financial statements to raise up to $5 million annually while those with no audited financial statements could only raise up to $3 million annually.
But Sente said Monday she plans to lower those caps to $4 million and $1 million, respectively.
Elliott Richardson, CEO of the Chicago-based Small Business Advisory Council, said his organization would lobby legislators for passage of the bill.
“Interstate equity crowdfunding can be an absolute game-changer for the small business community,” he said.
Press Conference Introducing Recently Filed Legislation To
Bring Intrastate Equity Crowdfunding to IL
CHICAGO (March 2, 2015) – Access to capital remains a significant challenge for many small business owners and entrepreneurs in Illinois. Today, March 2nd at 1:00PM, the Small Business Advocacy Council (SBAC) and Representative Carol Sente will be holding a press conference at 1871 highlighting recently filed legislation that will allow Illinois businesses and entrepreneurs to raise funds through intrastate crowdfunding. This new vehicle for raising capital will empower the small business community and stimulate our state’s economy.
The Small Business Advocacy Council, attorney Anthony Zeoli of Chicago based law firm Ginsberg Jacobs LLC, and State Representative Carol Sente have been leading the charge on this issue: Elliot Richardson, SBAC CEO, explains, “Intrastate equity crowdfunding will encourage local investment. It will empower the small business community. Many states, including Wisconsin, Indiana and Michigan, have already passed legislation allowing companies to raise money in this way. Passing legislation allowing for equity intrastate crowdfunding will ensure Illinois businesses are able to compete on a level playing field with those in neighboring states.”
Elliot Richardson, 1871 CEO Howard Tullman, Representative Sente and other business leaders will be speaking at the press conference.
As the legislation’s chief sponsor, Sente adds, "I'm thrilled to again be working closely with the SBAC, this time on their top priority of crowdfunding. Entrepreneurs, such as myself, value creative ways to finance our business ideas and often find the requirements of traditional lending sources challenging and therefore cannot adequately fund our venture. With this legislation, Illinois business owners will have another vehicle to generate resources for their business. We are working toward an extremely reasonable balance between opening up avenues that stimulate economic development and making sure consumers understand the online investments they are passionate about funding."
1871 CEO Howard A. Tullman stated, "Equity crowdfunding is a critical resource for the new businesses that make significant contributions to job and economic growth across the United States. Since the SEC has not yet issued regulations implementing the provisions of the JOBS Act to allow equity crowdfunding in the United States, this bill to allow intrastate equity crowdfunding in Illinois is an important step toward ensuring that our startup community can compete on a global scale."
Zeoli, a strong advocate for intrastate crowdfunding, explains, “The filing of the Illinois Intrastate crowdfunding bill is a tremendous step forward for Illinois small businesses and entrepreneurs. The proposed bill, if passed, will give Illinois entrepreneurs and other business owners the ability to raise much needed capital from Illinois investors. This will mean more available capital for Illinois entrepreneurs and small businesses, resulting in more Illinois jobs being created by these entrepreneurs and small businesses.”
Our neighbors in Michigan, Wisconsin and Indiana have all passed legislation allowing equity intrastate crowdfunding. Passing this legislation will make Illinois more competitive, encourage innovation and spark investments in local communities.
Elliot Richardson of The Small Business Advocacy Council is available to speak on the conference and this subject.