Here’s some encouraging news for your Wednesday. The Senate Commerce Committee spent less than 40 minutes discussing the latest version of the state’s proposed JOBS Act before approving it. Nearly every senator in the room lauded the bill for its effort to help companies raise funds and create jobs across the state.
And now both parts of the proposed law – intrastate crowdfunding and a new $208 million tax credit program for institutions that lend money to growing small businesses in rural communities – have a pretty sure bet at hitting the General Assembly’s floor next week before the spring session comes to a close.
The only other step before that happens is Senate Finance Committee approval of the $150 fee companies will be required to pay before they can file an exemption to existing securities laws and begin soliciting funds from the general public. And local leaders of the N.C. JOBS Act lobbying effort tell me that’s only a technicality.
The law in its current form is as close to the gold standard (Georgia, which perfectly addresses the needs of companies raising capital) as the state will get, says Nick Bhargava, co-founder of the real estate crowd lending site GROUNDFLOOR and a JOBS Act proponent. The major difference is that N.C.’s law includes more investor protections.
“I think given North Carolina’s culture and the way things work here, what we have is very good,” he says. “This is a seed stage tool, a way to get idea-stage, bridge-phase funding.”
The companies expected to benefit most from the new law are small consumer-oriented businesses, consumer product makers and app companies, anyone with a large customer base from which they can ask for support (Unaccredited investors can put up to $2,000 in a company under the new law). They may sell products all over the world, but the investors have to be in North Carolina to fall within the new law, says Mark Easley, leader of the JOBS Act lobbying team. They can raise up to $1 million without the state requiring an audit.
And for companies with rural operations in the state, the combined bill allows two forms of financing besides a bank loan: the new markets tax credit (a program copied from 14 other states) and crowdfunding.
If everything goes as planned, the law goes into effect as soon as state regulators develop a process for filing the exemption. According to Easley, they’ve promised for that to happen within 90 days. But the bill mandates it to happen within the next year. Bhargava and Easley expect the state to create a process and set of documents easy enough for any business owner or entrepreneur to file and begin crowdfunding without hiring a lawyer or accountant.
Bhargava expects the legislation to be an attractive alternative to the broader federal law:
“The federal law is more cumbersome than what we have by a huge degree,” he says. “Local businesses will have no need to use the federal once ours is in place.”
For more details on the JOBS Act and updates on the lobbying effort, check out Easley’s blog.