Every other week, On Small Business reaches out to a panel of entrepreneurs for answers to the most pressing questions facing small business owners. Today, on the eve of the election, we delve into some of the hot-button political issues that affect business owners. The responses are provided by members of the Young Entrepreneur Council (YEC).
Q: What can the federal government do to improve access to capital for start-ups and small businesses?
Eric Corl, president and co-founder of Fundable LLC in Columbus, Ohio:
The recent JOBS Act legislation will open up trillions of dollars in funding for small businesses by removing the general solicitation ban and allowing the general public to invest in startups. It is a perfect example of legislation that sparks investment and innovation, and will make the fundraising process more efficient for entrepreneurs. The implementation of this legislation by the SEC will be one of the biggest advancements in entrepreneurship in the past 50 years, and I know that the entrepreneurial community is looking forward to the day that the SEC moves forward with their approval.
I also encourage legislators to offer increased tax incentives at the federal level for those who invest in start-up companies. When coupled with the implementation of the JOBS Act, investor tax incentives have the potential to pay incredible dividends, and usher in a new era of innovation and economic growth.
Christopher G. Hurn, CEO and co-founder of Mercantile Capital Corporation in Orlando, Florida:
Community banks have mostly sat out this so-called economic recovery. This is due to a tremendously difficult and often conflicting regulatory environment today. Not holding community banks to the same standards as the TBTF (Too Big To Fail) banks would be a welcome relief and probably get these lending institutions, who historically make up the bulk of small business lending, back into the funding game again. Dodd-Frank is an overreach (while well-intended), and repealing many of its more punitive aspects would be a start, since the vast majority of community banks didn’t participate in the activities that contributed to the Great Recession.
SBA loan programs could be further “tweaked” to encourage more small business lending. For instance, the SBA’s 504 loan program (which Mercantile Capital Corporation specializes in) was temporarily allowed to provide refinances of commercial mortgage debt. This was a terrific program that met with growing demand in its final months and included supplemental fees to keep the program “zero-subsidy” or what is called “budget-neutral.” Unfortunately, its rollout was delayed over a year (of a two-year, temporary window), and then not extended when it expired at the end of the 2012 fiscal year. Billions of dollars of commercial obligations were refinanced at lower interest rates and at lower monthly payments for America’s small business owners, but only about $2 billion of the $15 billion originally authorized was used.
Another SBA provision that was temporary, budget-neutra and needed extending by at least a year was the 504’s First Mortgage Lien Pooling (FMLP) Program. It provided one of the few outlets for certain “special use” types of businesses like daycares, restaurants, and auto-repair shops and allowed banks to have more liquidity and provide even more capital to small businesses. Without the extension of the FMLP, a new credit freeze will no doubt blow again for these small businesses — something Washington could easily avoid.
Doug Bend, founder and small business/startup attorney at Bend Law Group, PC in San Francisco, California:
Relaxing the crowdfunding rules provides a great new option for start-ups to raise capital. However, federal regulators need to make sure investors understand how extremely risky it is to invest in a startup and that most of the time the investor will lose their entire investment.
For crowdfunding to be a viable long-term source of capital, potential investors need to not only understand the upside of betting on the next Instagram or Facebook, but also the much more likely downside of investing in a start-up that is not successful.
The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
OSB election guide: Explaining President Obama and Mitt Romney’s positions on the most important political issues facing entrepreneurs and small business owners.