Will the JOBS Act Boost Your Small Business?
The U.S. House of Representatives on March 8 passed the Jumpstart Our Business Startups (JOBS) Act in an overwhelming majority and uncharacteristically bipartisan vote. Support from the U.S. Senate and White House is widely anticipated, and the bill is expected to become law soon.
Many small-business owners are wondering what — if any — impact the JOBS legislation could have on their enterprises. As it turns out, it mostly depends on whether or not you plan to go public.
Going Public Gets Easier
Despite its acronym, the JOBS Act isn’t intended to spur immediate job growth as a more traditional public works program might. Instead, the legislation would make it easier for startups and small businesses to grow and, eventually, go public.
By relaxing stringent SEC restrictions governing IPOs, the law would help small companies obtain the funding and support necessary to become a publicly traded entities. In accordance with the proposed rule changes, small-business owners would, for the first time, be allowed to advertise searches for investors and to obtain “crowdfunding” to back their IPOs.
Until now, red tape and old SEC provisions made it nearly impossible for entrepreneurs to raise funds legally in public. Some high-profile backers of the JOBS Act argue that there is little logic in perpetuating these archaic restrictions. “[Imagine] the next Steve Jobs being held back by rules from the age of the typewriter,” says U.S. Sen. Scott Brown. “When are we going to give the tools and resources to our job creators? [Crowdfunding] is an innovative way to look outside the box and get up with the times to open up capital markets to new businesses and existing small businesses. It has the potential to be a powerful venture capital model.”
What JOBS Means for Your Business
Political rhetoric aside, the JOBS Act may have little if any immediate consequence for your company if you are not considering — or are in the process of — going public. If, on the other hand, an IPO is on your long-term radar, the potential changes brought about by the legislation could enable you to raise equity capital from an expansive pool of smaller investors.
In terms of sparking new hiring opportunities, don’t be confused by the hype surrounding the bill, its name, and its potential to fuel job growth. “Startups that survive are very important to job growth,” economist and former White House adviser Jared Bernstein tells CNN. “The question here is whether these measures will help support the growth of startups in ways so they can make a much bigger contribution to employment. We won’t know the answer on that for a while.”
Although Republicans and Democrats on Capitol Hill largely see eye-to-eye on the value of the JOBS Act, the bill has a few vocal critics. Lynn Turner, former chief accountant of the U.S. Securities and Exchange Commission, is among the bill’s detractors.
“The problem is they’re not going to create jobs. IPOs don’t drive the economy, the economy drives IPOs,” Turner asserts. “You’re creating a much easier situation for fraudsters to step in and take advantage of people.” The legislation, for example, would dramatically alter the type of information companies would be obligated to provide to the public during an IPO. Turner considers that a dangerous situation that makes it easier “for sell-side analysts to pair up with investment bankers.”
Michael Essany is a business writer for Intuit and is passionate about solving small business problems.