crowdfunding increasingly seen as small business support alternative

Confronting economic losses as a result of the COVID-19 shutdown, many small businesses are turning to the practice of crowdfunding in order to stay afloat.

Long a practice in the business world, the concept of many investors providing support to start or help maintain a business through smaller donations has grown dramatically through the use of the Internet.

According to sources, more than $34 billion in support was raised worldwide for various projects through crowdfunding in just the year 2015 alone.

Now the federal Securities and Exchange Commission has just announced that it is loosening restrictions on the use of crowdfunding for small businesses. By so doing, funds for those businesses can be made available in a more timely manner.

According to an SEC press release, the new policy will “expedite the offering processes for eligible companies by providing relief from certain rules with respect to the timing of a company’s offering and the financial statements required.”

“There’s significant capital out there,” Nancy Kerrigan, chief executive officer with the Small Business and Entrepreneurship Council, said of crowdfunding platforms as a source of support for small businesses.

“It’s just that it has to be unlocked by investors seeing good ideas in the marketplace or solid ideas, and that’s what the platforms are doing,” Kerrigan said in an interview with the Washington Examiner magazine.

According to one study, more than 13,000 individual crowdfunding efforts have been undertaken for small businesses through the site Go Fund Me since the COVID-19 outbreak.

The various campaigns have proved successful enough for some state governments to become involved: the Michigan Economic Development Corporation has just announced that it will provide up to $500,000 in matching grants for small business crowdfunding.

In New York, a new company offering health juices and smoothies called Pure Green has just completed a round of crowdfunding raising $1 million in support, with some investors putting up as little as $100.
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Crowdfunding sites, including Indiegogo, Patreon, and Kickstarter, require a 5 percent fee for all funds raised. Other sites ask for a certain percentage per pledged transaction.

By Garry Boulard

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