In addition to allowing firms to raise capital from anyone via a crowdfunding platform (a Financial Industry Regulatory Authority or FINRA registered internet website set up specifically for this purpose), Cunningham notes that the SEC also approved rules making it easier for companies to sell stock in small or startup companies to potential investors residing in the state in which the startup (or small firm) is located. This is another potentially beneficial capital raising option for black owned firms, which tend to be hyper-local.
“The new rules are not without drawbacks, however, crowdfunding platforms will be allowed to accept stock in lieu of payment for capital raising services provided,†he says. “So, small firms will have to watch out for crowdfunding platforms that charge say 50% of your stock to help you get funded. Given the lack of brokerage firm ethics we saw in the years leading up to the financial crisis, this is a serious issue, but the potential for good far outweighs the downside.â€
Raising equity or selling ownership shares is a very difficult and complicated task, mainly because of the convoluted rules governing how you can do so, adds Cunningham, who also is the author of The JOBS Act: Crowdfunding for Small Businesses and Startups. “The SEC action makes it a little easier to get the capital needed to launch (or enlarge) your firm.â€