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Business Finance

SEC stalls in setting rules for crowdfunding

To the frustration and dismay of many, the SEC not only missed their deadline to set rules for crowdfunding in 2012, the commission continues to delay and stall the process.



Crowdfunding is increasingly popular

It’s always been the responsibility of business owners to carry out the footwork needed to secure capital funding. Many go the traditional route, seeking financial assistance from banks and other lenders. But in recent years, more entrepreneurs are utilizing crowdfunding to meet their financial needs, tapping into the pockets of willing peers, angel investors, friends, and family that believe in their business plan.

Going with this option bypasses some of the hassle that comes with borrowing from a traditional lender; however the Securities and Exchange Commission (SEC) has since caught wind and stepped in to regulate this method of venture capital going forward. SEC regulations were initially due at the end of 2012, however we’re now almost in March of 2013 with no word on when things will be finalized. The departure of chairwoman Mary Schapiro was a big contributor to the delay, and her role is currently still unfilled. Until a replacement is chosen, the wait for new regulations will drag on.

Crowdfunding rule delay is problematic

The delay is problematic for many reasons – mainly the damper it puts on job creation and business startups. If companies are more easily able to secure the capital they need to fund the operations of their business, they can hire staff and employees, which can help counteract the rate of unemployment.

Additionally, new businesses help spur positive economic activity in the surrounding community, which is a huge catalyst for growth. This venture capital option is also beneficial in that if companies aren’t able to secure their full asking amount from a bank or credit union, or don’t qualify under the standards set forth by these institutions, they can use crowdfunding to source that needed capital from investors and peers that believe in the strength of the business.

In the end, entrepreneurs will still be tasked with proving their worth and promise of growth to investors, but there are fewer degrees of separation between the investor, the business owner and the number of protocols to go through in order to obtain funding. For now, the business community will keep their eyes trained on the SEC, remaining on the lookout for Schapiro’s replacement and any movement on finalizing regulations.

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Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.

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