By Karen Mills
, Former SBA Administrator
Published: December 8, 2011
Updated: December 8, 2011
This article is co-authored by Gene Sperling, Director of the National Economic Council, and cross-posted on the White House blog.
Today, we can do more to increase the amount of capital that flows into the hands of entrepreneurs at every stage in the growth of their companies.
Helping these businesses grow is a top priority for the Obama Administration, as we know that small businesses create most of net new jobs that are added to the economy each year. We have an economic imperative to make sure we support these firms through creating an environment where they have access to capital markets to help facilitate growth at every stage.
Over the past three years, we have made great progress in helping small businesses. The President has signed into law 17 tax cuts for small businesses, from greater expensing provisions to the President’s signature call to eliminate capital gains taxes on certain investments in small businesses as well as two new small business lending funds. SBA loans also had an all-time record year. Right now, the President continues to call on Congress to cut payroll taxes in half for nearly 6 million small businesses, providing even more incentives for them to hire and grow.
Startups and high-growth firms – the biggest job creators – have different capital needs than other small businesses. That’s why almost a year ago, we launched Startup America, a White House initiative to create the best possible climate for high-growth entrepreneurs across the country. Today, at the Startup America Partnership board meeting hosted at the White House, we are announcing two important initiatives that show how we are working to specifically address the needs of startup businesses. And the President is calling on Congress to do more.
At the same time, the independent Startup America Partnership has mobilized commitments from more than 50 private-sector partners to deliver over $1 billion in value – from free software to free consulting and legal services – to 100,000 startups over the next three years.
And there’s more action we can take. In September, when the President announced his American Jobs Act, he called on Congress to take specific steps to help small businesses raise the funds they need to innovate and grow. Consistent with this call to action, the President is urging Congress to work on a bipartisan basis to develop these ideas by passing legislation related to:
- Crowdfunding: Nonprofits have already harnessed the power of online fundraising and social media to help meet their mission. In a similar way, we can create an appropriate regulatory framework for small businesses and startups to raise the capital they need from many small-dollar investors, while ensuring investor protections.
- Regulation A “Mini-Offerings”: For small businesses seeking to raise less than $5 million, there is an existing exemption from certain SEC requirements. But very few businesses are taking advantage of this “Regulation A” exemption today. The President has called for raising that limit to up to $50 million, making it easier for small companies to raise the capital they need to grow.
- Creating an On-Ramp for Emerging Growth Companies: For emerging growth companies, the vast majority of new jobs are typically created after they “go public.” Yet from 1995 to 2010, listings on U.S. exchanges shrank from 8,000 to 5,000 while listings on non-U.S. exchanges grew from 23,000 to 40,000. In March, after we held an Access to Capital conference, entrepreneurs and other private sector stakeholders formed an “IPO task force” and reported back to the Treasury Department with recommendations to help scale regulations for emerging growth companies while providing strong investor protections. Some of these ideas are being explored by Congress and the Administration right now.
While moving quickly to pass these initiatives, Congress must develop these proposals in ways that will continue to protect American investors. Over the past few months, we have begun to make real progress. Members on both sides of the aisle have supported legislation consistent with the ideas that the President called for. Legislation has passed the House of Representatives with overwhelming bipartisan support. And last week, these issues were highlighted at a Senate Banking Committee hearing where Chairman Tim Johnson noted “This is an issue where I believe there is real potential for bipartisan cooperation.”
Overall, efforts like these could help improve liquidity for entrepreneurs, and help jump-start the innovative American companies of tomorrow. At the same time, we need to ensure that as we develop these initiatives we are taking necessary measures to ensure that investors are protected – and the Administration will continue working with Congress to achieve this outcome.
The President, both of us, and leaders across the private sector understand that “one size doesn’t fit all” when it comes to helping small businesses, especially startups and high-growth firms. Let’s make sure they can get access to the kinds of capital they need to grow and create the jobs we need now.
Karen Mills is the SBA Administrator and Gene Sperling is the Director of the National Economic Council