In addition to allowing firms to raise capital from anyone via aÂ crowdfunding platform (aÂ Financial Industry Regulatory Authority orÂ FINRA registered internet website set upÂ specifically for this purpose), Cunningham notes that the SEC also approved rules making itÂ easier for companies to sell stock in small or startup companies toÂ potential investors residing in the state in which the startup (orÂ small firm) is located. This is another potentially beneficial capitalÂ raising option for black owned firms, which tend to be hyper-local.
“The new rules are not without drawbacks, however, crowdfundingÂ platforms will be allowed to accept stock in lieu of payment for capital raising services provided,â€ he says. “So, small firms will have to watchÂ 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 inÂ 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 andÂ 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 theÂ capital needed to launch (or enlarge) your firm.â€