Bolstr

Facebook Graph Search and What it Means for SMBs

Thu, 07 Feb 2013 13:22:00 +0000

Recently, Facebook made headlines by announcing its Graph Search. Here, we’ll break down exactly what that is and what it means for small businesses.

What is Facebook Graph Search?
Simply put, Facebook Graph Search “produces search results based on what your friends likes and interests are.” (BusinessInsider) For individual Facebook users, that sounds pretty interesting and useful. But let’s find out what it means for small business...

According to Forbes contributor, Kern Lewis, “For businesses, anything that makes access to this useful database is good. So, once Facebook really gets Graph Search rolling, it should be a great addition to your marketing toolbox. In effect, Facebook members (your customers) will be able to search on a topic, and automatically get results that reflect the likes of their Facebook friends. So, if the searcher’s Facebook friends “Like” your business, your business is more likely to appear in the search results.”

Francesca Fenzi at Inc.com points a few more reasons small business owners should take notice: “Word-of-mouth recommendations are going to be even more powerful.” This makes sense if you think about it as a recommendation conversation amongst friends without really having a conversation.

Additionally, if you use Facebook ads for your small business, Facebook Graph Search will undoubtedly mean tighter targeting.

So as this new feature starts to roll out, it will certainly be interesting to see how small businesses use it to attract more customers.

Small Business Quick Tip

Tue, 05 Feb 2013 10:10:00 +0000

Are you considering crowdfunding to raise capital for your small business? If so, here are atwo things you should be doing:

Keep an eye on the latest news surrounding the JOBS Act. While with Bolstr, small business owners are able to raise funds now, understanding the JOBS Act will help you navigate your fundraising effort. One easy way to get up-to-speed? Shoot us a note and we’ll give you all the basics in terms anyone can understand.
Think about what you’re willing to give in return for investment. Equity? Bank debt? Shares of future revenues? Check out our “How Bolstr Works” page to compare the three.

Replacing the Register

Mon, 04 Feb 2013 18:20:00 +0000

Next time you’re at a coffee shop or your dry cleaners or your local gastropub, pay special attention to how your payment is processed. It may not be as it’s always been...

More and more small businesses are migrating to new technologies that are replacing the traditional point of sale. From payment via mobile devices to iPads strapped with Square, the way small businesses are accepting payment is changing. Here’s a breakdown of a few of the new options, along with pros and cons...

Square

If you’ve seen a merchant swipe your credit card through a square-looking device plugged into an iPhone, iPad or Android smartphone, there’s a good chance it’s Square. Founded by Jack Dorsey of Twitter and Jim McKelvey, Square is essentially a mobile payment processor. The plugin device is free, as is the app. From there, Square takes 2.75% of each swipe. That might feel a little high, but if you’re a small business owner who’s always on the move, it might make a lot of sense. Plus, Square is PCI compliant. (That means it meets The Payment Card Industry Data Security Standard.)

LevelUp

Now this is a little more interesting. For the consumer, LevelUp is a mobile app that’s linked to a credit card. For the small business, LevelUp is a point of sale device to which the consumer pays by presenting his or her LevelUp code (which is on their phone). The POS device recognizes it and the payment happens. One key benefit to the business is that there’s loyalty built in to the transaction via campaigns: use your LevelUp app and you’re often rewarded with discounts for future purchases. Also, another big win for the merchant: no transaction fees. The only downside might be the proliferation of LevelUp amongst your customer base.

GoPago LIVE

GoPago LIVE is essentially out to replace your entire point of sale system. They send you a cash box, a credit card reader, a small printer, a cable box, a tablet and a stand. Once you put all this stuff together, you’ll be able to accept cash, credit cards, and mobile payments. On the plus side, GoPago LIVE keeps everything all under one roof and you’re able to access your data via the web. One the flipside, there’s a monthly subscription of $99 plus 2.85% on any credit card transaction above $12.

While these are just a few of the latest technologies that are shaking up the small business payment processing world, there are sure to be more. If your small business has explored any new payment tech, tell us about it in the comments!

Tip of the Week: Leverage Your Local Community

Mon, 31 Dec 2012 16:14:00 +0000

Local small businesses are the backbone of American innovation and prosperity. Every corner store, family restaurant, hair salon, coffee shop and bakery has a unique and interesting story worth sharing with the local community. We started Bolstr to help small business owners raise capital – but what we really wanted to encourage was the notion of investing locally through community support, where businesses can raise smaller investments from a larger group of people around them.

As a small business owner, your priority list should include leveraging your local community. Many small business owners fail to see or realize the opportunities that their local community can provide, or just don’t know how to tap into that resource. We’ve outlined a few of our favorites below:

1. Be Specific Inform your customers and the community about what they can do, and don’t leave out the details. If you’re raising business capital, discuss the opportunity of becoming an investor through Bolstr. If you’re looking to broaden your customer base, ask loyal customers to tell their friends and family about you, or give them extra business cards to share. Its all-too-common for people to want to get involved, but just aren’t sure how.  

2. Engage with the community Attend neighborhood events, join your local chamber of commerce, or simply stop in and meet the owners of other businesses in your neighborhood. By expanding your social network, you can expand your customer base. You will also establish a powerful network that understands what it means to be an owner/operator of a local business. These people will be some of the most important resources to you as you run into the inevitable turbulence.

3. Show appreciation Now that we’re in the middle of Holiday season, it’s a perfect time to thank your customers for another year of business. Even with the smallest of budgets, you can still offer them something to keep you top-of-mind for the New Year. Send customers a handwritten card, throw a customer Holiday party or maybe give a free gift with each purchase. Whatever it may be, a small token of appreciation goes a long way!

As a small business, engaging with your community is pivotal to your success. With a little effort, you can strengthen your community relations, the performance of your business, and therefore your bottom line!

Crowdfunding is Here Today and It’s Perfect for Your Business

Tue, 18 Dec 2012 16:53:00 +0000

This is a guest post that we wrote for the Grasshopper Blog:

Have you ever considered crowdfunding investment capital to grow your business? You may be thinking, “But, I thought that was only legal for creative projects looking for donations?”

Sure, that used to be the case but it’s about to change in a big way. Crowdfunding has traditionally been a vehicle for individuals to pool money to fund creative projects with a social mission in mind. Over the last several years, this has proven to be a powerful method of fundraising. In fact, some donation platforms have already facilitated the raise of over $300 million.

Despite the success of crowdfunding, it has been largely inaccessible to businesses looking to raise capital from investors. It also typically consists of very low dollar amounts. Kickstarter is the largest donation based crowdfunding platform, yet 80% of successful campaigns on Kickstarter are below $10,000.

The good news is that the passage of the JOBS Act will create some very exciting opportunities. This new legislation will allow businesses to raise money by crowdfunding investment capital from people across the country. In effect, this gives individuals the opportunity to make actual investments in real businesses (i.e. the ability to earn a financial return), as opposed to crowdfunding donations for projects in exchange for perks. We believe that this new opportunity will drastically increase the amount of money small businesses are capable of sourcing and revolutionize the way in which small businesses access capital.

Unfortunately, it’s going to take a while before the SEC is able to write the specific rules around this game changing legislation. That being said there are a handful of innovative entrepreneurs who have figured out a way to bring crowdfund investing to small businesses today. We would categorize these platforms into three main groups: donation platforms, broker dealer platforms, and other investment platforms that have figured out a way to operate ahead of the change in legislation.

Donation based platforms like Kickstarter, and Indiegogo have been very successful in helping creative projects access the capital needed to get their projects funded. Though they traditionally have been focused on artists, the new crowdfunding legislation may change that for folks looking to rally large numbers of people around their business or idea. Kickstarter appears to be uninterested in participating in this new investment regime, however it looks like Indiegogo and a few others are coming up with models that will address this new opportunity with a focus on startups and small businesses.

The second category of platforms represent a group that has chosen to register their platform as a broker dealer or to partner with a registered broker dealer in order to help businesses crowdfund investments from accredited (wealthy) investors. With the broker dealer affiliation comes many restrictions that inhibit the ability for these platforms to offer a true crowdfunding experience. For example these platforms only allow accredited investors to participate (accounting for less than 2% of the American population), and most focus on larger businesses looking to raise $100,000+. One such platform is CircleUp, which has been effective in helping medium sized consumer businesses raise investment capital from angel investors across the country.

Finally, there are a couple investment based crowdfunding platforms that are in operation today ahead of the JOBS Act implementation. These platforms enable investment crowdfunding for small businesses and include non-accredited and accredited investors. At Bolstr we have built such a model through forming a new marketplace where individuals and patrons can invest in, and support local small businesses in their neighborhoods. We believe that small businesses deserve access to capital for operations and growth. Community investment not only gives a small business access to capital, but it also creates an army of local supporters financially motivated to spread the word and promote the business throughout the community.

Whether you are an artist looking to fund a project, a startup looking to source capital from angel investors, or a small business looking to invest in your businesses growth, there is a crowdfunding solution in operation today that can help you reach your goals.

Bolstr is the first investment based crowdfunding platform that helps entrepreneurs raise capital from people in your network and community, and easily comply with the regulatory system as it stands today.

Beyond the bank: Unconventional sources of small business funding

Thu, 13 Dec 2012 06:00:00 +0000

Ask any small business owner how they would obtain capital for operations or growth - chances are they would reply through a bank loan, or debt. Unfortunately this traditional avenue of capital has been, and continues to be largely unavailable for small businesses. Just look at the numbers. A recent Pepperdine Study showed that:

78% of small businesses call it "difficult" to raise debt financing
56% of small businesses are denied bank loans; and
45% of small businesses were forced to transfer personal assets to their business

Obtaining financing for a small business even in an healthy economy can be challenging, since many business owners lack operating experience and solid credit history. Today’s tight lending environment is making it even tougher for entrepreneurs to raise money to operate and grow their businesses.

But, don’t be too discouraged - there ARE alternative sources of capital available to small business owners. You just need to identify your resources and be open to new and innovative options. Here are a few to get you started.

Local Communities:

Small businesses that raise money from their community are successful 70% of the time!

One of the most widely overlooked sources for small business capital is the local community. In recent years, there has been a unified push for consumers to support local small businesses and to ‘buy local’. The way we see it there’s no reason why people shouldn't be able to easily ‘invest local’ as well.

Bolstr allows you to create a local ‘army’ of investors – people who become financially incentivized to spread the word about your business. These are the people that pass the chain store to walk into yours and are eager to help you expand your business through making a small investment. Believe it or not they want to support you - all you have to do is ask!

City and State Resources:

Get educated on the City and State resources available to you!

There are thousands of government agencies and not for profit organizations that financially support small businesses. Check with your city and state economic development agency to see if there are specific programs or grants associated with your particular industry cluster.

Oh, and by the way, there are FREE services available to you to help navigate through your options. For example, small business advisors and counselors are on hand ready to help - all you have to do is schedule a meeting with your local Small Business Development Center ("SBDC"). Local SBDCs are a great FREE resource for business advice and mentorship. Click here to find the closest one to you!

Funding Matchmakers:

Get matched with the best source of funding for your business!

The landscape of small business capital is quickly expanding. This has spawned a new breed of companies focused entirely on helping you get matched with the best type of funding for your business. For example companies like FundWell and Multifunding are dedicated to advising you on all of the options on the spectrum. This includes everything from purchase order financing, and royalty-based financing to SBA loans and USDA loans.

Although bank lending to small businesses is evaporating (maybe for good) new and innovative alternatives have surfaced to the mainstream. They are readily available to those open to doing things a little differently. So why wait - get online and seek them out!

It Pays to Help a Local Small Business!

Wed, 14 Nov 2012 21:28:00 +0000

Is there a cool local small business in your neighborhood that you would like to invest in? Through Bolstr, you now have the ability to support that local small business by making a small investment. Simply refer them to the Bolstr platform!

Details:

For any business that you send our way that starts a campaign on the Bolstr platform, we'll award you a $100 Amex gift card! Simple as that!

BOLSTR YOUR BUSINESS - $5,000 GIVEAWAY!

Tue, 06 Nov 2012 21:41:00 +0000

How would you like some extra cash to invest in the growth of your small business? Bolstr is awarding a local small business $5,000 in cash to do exactly that!

If you are a local small business that has been in operation for at least a year, and could use some extra funding to take your business to the next level then Bolstr can help!

To enter, simply fill out a campaign on the Bolstr platform. We will review each campaign and pick the local small business that has the best story, and that best demonstrates how they will use the funding to grow their business.

Requirements:

You have at least one year of historical revenue
You make less than $5 million per year in revenue
You are a passionate business owner looking to invest in growth!

Bolstr Launches at Finovate - Brings Crowdfunding to Main Street

Tue, 18 Sep 2012 12:50:00 +0000

First investment based crowdfunding platform exclusively for local small businesses.

The team at Bolstr launched the first investment-based crowdfunding platform for main street small businesses at Finovate – “a two-day showcase of the best new innovations in financial and banking technology."

Bolstr takes a local approach to crowdfunding, empowering communities to invest in and support the small businesses around them.
Access to capital for main street small businesses has long been an uphill battle. Small Business Loans and Home Equity Lines are challenging to get, and Credit Cards are expensive alternatives. It is clear that small businesses, the engine of our nation’s economy, need an alternative source of capital to jumpstart growth.

Bolstr founders Charlie Tribbett and Larry Baker, both former New York City investment bankers, are excited about democratizing access to capital through their new and innovative small business capital marketplace, which they say is driven by transparency, near term liquidity for investors, and a hyper local approach.

“We're thrilled to have launched at Finovate to showcase our innovative solution that helps main street small businesses crowdfund investment capital from local investors in their community. We are the only investment based solution in the market Pre-JOBs Act and our hyper local approach to crowdfunding brings a new dynamic that enables capital access for small businesses,” Tribbett said.

The Bolstr team is focused on democratizing access to capital by allowing small businesses to seamlessly source investments from local investors in their community, and leverage this powerful investor base for word of mouth marketing and support.

“At the end of the day, Bolstr helps main street small businesses build a network of supporters in their community who are invested in their success. Our revenue sharing agreement allows them to maintain 100% ownership in their business, and to reward their investors with near term payouts based upon the sales performance of their business,” Baker said.

To participate on Bolstr businesses must be incorporated and have at least two years of financial history. For more information or to apply to use the platform please visit www.bolstr.com or email info@bolstr.com

About Bolstr:
Bolstr is a crowdfunding platform that empowers communities to invest in local small businesses. We believe that local investment is the key to economic growth. Through Bolstr, we have created a marketplace where individuals can invest in and support the local small businesses that make their communities home. Through step-by-step guidance, Bolstr helps Small Businesses create a professional pitch, determine fair deal terms, and source investment capital from their network and community. In essence, Bolstr’s innovative platform democratizes and demystifies the process of raising investment capital.

Perspective on equity crowdfunding from the founders of Bolstr

Fri, 03 Aug 2012 20:31:00 +0000

The Following is a Guest Post written by the founders of Bolstr for Bill Carleton's "Counselor @ Law" Blog:

On the heels of the JOBs Act, which may be deemed as one of the most revolutionary changes to financial regulation in our history, entrepreneurs raced to develop new platforms to capitalize on the rule change. Crowdfunding quickly became the buzz with a multitude of new platforms popping up. This created a confusing conglomerate of vastly different models all claiming to be the market leader. In this guest post we attempt to decipher through the noise, and shed some light on this burgeoning sector.

Let’s start by introducing ourselves. We are the founders of Bolstr, the first crowdfunding platform focused exclusively on the small business demographic, and the only investment-based platform that is in operation today (Pre-JOBS Act). We set out on this mission over a year ago, prior to any talks of crowdfunding legislation. We never thought that the Securities Act of 1933 (amended) would be repealed in our lifetime, so we set out to ascertain a solution that would work within the confines of the current regulatory system. This was a daunting task to say the least (See Paul Graham’s post on “Schlep Blindness”), but one that we whole heartedly believe is critical to our society, and economy.

We believe that small businesses deserve access to capital for operations and growth. We also believe that local individuals investing in local small businesses will help create local jobs, wealth, and economic progress. Community investment not only gives a small business access to capital, but it also creates an army of local supporters financially motivated to spread the word and promote the business throughout the community. This is our vision.

When we tell this story the first response we get is “but only accredited investors (those who are millionaires) are allowed to invest right?”… Or, “so these aren’t actual investments, they’re donations right?” The answer to both of these questions is, no. On Bolstr any individual is able to make an investment in a local small business in their community regardless of their personal wealth. They also have the opportunity to share in the financial upside of that business through a custom investment structure called a revenue share.

After extensive research into the current securities laws we found a way to make this mission a reality. Here is an overview of how:

Bolstr leverages Regulation D, Rule 504 to enable small businesses to raise up to $1,000,000/yr from individuals in their community including those who are unaccredited

Bolstr’s proprietary compliance engine helps small businesses easily construct a fundraising campaign – it takes into account a multitude of variables to ensure each business complies with the complicated state-by-state blue sky regulatory laws

Each campaign on Bolstr is private and secure, allowing businesses to source capital from individuals around them (i.e. those that they have pre-existing relationships with).3) Each campaign on Bolstr is private and secure, allowing businesses to source capital from individuals around them (i.e. those that they have pre-existing relationships with).

We’ve been following this industry closely for several years and have watched the evolution first-hand. The market today has a plethora of platforms with remarkably different models all using the term “crowdfunding”. We classify them into three groups: donations, investments, and new entrants looking to capitalize on the JOBS Act.

Donation Platforms:

Platforms like Kickstarter, Indiegogo, Rockethub, and Fundly have been operating successful donation based models for years. There is a misconception that these platforms are donation based purely because it is illegal for them to facilitate the general solicitation of investments today. The fact is that many donation-based platforms may not stray away from their core even when the JOBs Act is effective. In fact, Kickstarter has already stated that they are not interested in the JOBs Act model. The donation model has proven successful, and it will likely continue to be a dynamic way to fund interesting projects or to pre-sell new products for some time.

Investment Platforms:

Bolstr represents the first breed of investment based crowdfunding platforms for small businesses. We do not allow startups, and are the only platform successfully operating pre-JOBs Act with both unaccredited and accredited investors participating. In December 2010 Profounder launched a somewhat similar model to Bolstr focusing on a broader criterion of businesses including start-ups. Unfortunately, Profounder was deemed to be operating without a broker dealer license, and was ordered to desist and refrain from operation in August 2011. In his WSJ article "Crowd-Funding Brings Unease" Angus Loten does an exellent job outlining this chain of events.

Aside from Bolstr the vast majority of investment based platforms today have registered as a broker-dealer. To name a couple, MicroVentures and CircleUp are in this group. Although these platforms often use the term “crowdfunding” they are far from it, since they are limited to only “Accredited Investors” (Roughly 2% of the U.S. population). They are also restricted to facilitating larger offerings for mature companies, as opposed to main street small businesses, because of the cost associated with broker dealer compliance.

New Entrants:

This is where it starts to get fuzzy; almost all of the platforms that emerged over the last 9 months have been fall-out from the JOBs Act. This group continues to wait in limbo for the specific rules to be written that will govern how they are able to operate. As a result, many have not facilitated a single transaction, have not outlined a clear market focus, and in some cases have not completed building their platform. It will be interesting to see how these platforms evolve as clarity around the JOBS Act surfaces.

At Bolstr we can proudly say that we are the only investment based crowdfunding platform in operation today, due to the fact that we allow both unaccredited and accredited investors to participate in an offering. We are also not restricted by the size of the offering that can take place on our platform, and have a specific focus on main street small businesses.

Hopefully this blog has helped to filter through some of the noise in the crowdfunding space. For the time being it is inevitable that the landscape will continue to be blurred as new entrants look to capitalize on the rule change. Over time we expect the market to become more segmented and specialized, as clear winners in their respective areas become evident. For the time being all we can do is enjoy the ride and watch the market evolve. We have our views on the various models and market segments that will succeed, but that is a post for another time.

Charlie Tribbett & Larry Baker are the founders of Bolstr. For more information about them visit www.bolstr.com, or check them out at FinovateFall 2012: The Biggest Innovations in FinTech! on September 12 & 13th.

Why Small Businesses don't use growth capital

Mon, 16 Jul 2012 16:48:00 +0000

Throughout the last year we have had the opportunity to speak with A LOT of Small Businesses. We often ask them what their goals are from a growth perspective; maybe it’s a sales target, expansion to a new location, extending their product offering, or simply status quo. We also ask them whether they would be willing to take out debt or raise capital from investors to support their objectives.These conversations serve as the basis for this blog post.

What we have noticed is that small businesses tend to have a negative perception towards bringing in outside capital. Now we’re not saying taking out debt or raising capital from investors is a good fit for every business. Some businesses are happy with where they are and aren’t looking to grow or expand. For others that do have grandiose growth objectives, we have noticed that there tends to be a negative connotation towards taking out debt or raising investment capital. Unlike the high-tech sector, small businesses tend to be extremely risk-averse when it comes to raising outside capital to bolster growth. They also tend to wait until the business is in need of capital to survive rather than source capital to thrive during good times.

We recently spoke to a small micro brewery in Florida and when asked if they were in need of capital they answered, “No, we have already pre-sold our entire output through the end of the year”. The business owner articulated that they were looking to expand volume but would not be interested in raising additional capital. Assuming their plan is to be the next Sam Adams or Dogfish Head (Which seemed to be the case), raising capital to purchase new equipment could be a powerful way of accelerating their growth objectives.

Bringing in growth capital is a serious event, and as business owners we understand the hesitation towards putting debt on your business or selling a piece of the business that you have put your blood, sweat, and tears into. However, taking out a small business loan or raising capital from investors can be a powerful tool for growth. Savvy business owners utilize growth capital to finance transformational events in their companies’ lifecycle everyday (i.e. new equipment, expansion to a new location, increased product offerings).

When developing Bolstr, we took these concerns to heart. We wanted to create a custom security that alleviated a small business owners concerns while getting them the capital needed to take their businesses to the next level. This is why we developed a custom security known as a revenue sharing agreement. A revenue sharing agreement allows a small business to access the capital necessary to grow, while still retaining 100% ownership in their business. Coupled with our dynamic crowdfunding platform, the structure also creates an army of people in the community that are now invested in their success. We even limited the term of the agreement to a maximum of 5 years so that the business doesn’t burden cash flow for an indefinite period of time. For more information on how this structure works, you can read about it on our site.

Local Investing in Small Business Key to Economic Growth

Tue, 03 Jul 2012 13:00:00 +0000

In our last post entitled Small Business Lending is dead (Or at least on life support) we discussed how the small business lending practice for banks is fundamentally broken. Without a government subsidy (SBA guarantee) small business lending is simply an unprofitable business for banks. It’s thus no surprise that despite the hoards of cash deposits banks are holding today, the proportion of small business loans to deposits continues to decline. Ami Kassar, Founder and CEO of Multifunding does an excellent job analyzing how big banks are not lending their fair share to small businesses in this New York Times column: Grading Banks on Their Small-Business Lending.

When small businesses ARE able to access loans from banks they come at a tremendous risk, and up front cost to the owner. This is because most small business loans require the owner to personally guarantee them, as well as to come up with up-front cash (money they often don’t have) for a down payment.

It’s clear that small business loans are largely absent, risky, and costly. It’s time to get back to basics. Local investing in small businesses is key to economic growth. Throughout our nations history we have seen many small and large businesses get off the ground from local investors. Lets not forget the days when money was leant to the community farmer, dentist, or butcher not because they had a 750 FICO score, but because the lender personally knew the character of the borrower from their interactions in the community.

Investing locally creates a positive economic ripple effect spurring small business growth and job creation. When local investors generate a return it is often spent back in the local economy further enhancing local businesses, and often spilling over into neighboring communities. This is a cycle that when repeated can have a tremendous impact on our nation's economy since small businesses employ roughly 65% of our workforce.

Local businesses support their communities every day. Not only through their products, personal customer service, and local jobs, but also through being the symbol that makes people in the community feel “at home”. People love investing in and supporting what they know and cherish. According to a Pepperdine study small businesses are able to access funding from their friends, family, and community an astonishing 76% of the time! What’s even more exciting is that through technology, and recent crowdfunding legislation this market has become more accessible than ever before.

80% of the funds raised in crowdfunding campaigns today come from individuals in that person’s social network. This is a huge liquid marketplace for small businesses to not only raise money to expand their bakery, renovate their coffee shop, or purchase a key piece of equipment for example, but also to create an army of customers and community members who become passionate stakeholders in the business eager to buy more, and encourage others in the community to do the same.

After all, who wouldn’t love to own a stake in the local coffee shop they frequent each morning, or the local brewery on the corner, and who better to judge the creditworthiness of the small business owner, and the growth potential of the small business than the community members interacting with the business regularly. Crowdfunding is here to stay, and small businesses that utilize it to raise capital from local investors could stand to give their business and our overall economy a significant boost.

Small Business Lending is dead (Or at least on life support)

Tue, 26 Jun 2012 01:25:00 +0000

It is no secret that banks are having an awful time lending to small business. After all, they are extremely risky and are typically hit hardest by economic down cycles. But is it a question of risk or is it a larger fundamental flaw in the way traditional brick and mortar financial institutions are structured?

The traditional banking method of originating a small business loan is broken. Lending institutions are forced to rely on imperfect barometers of the health of a business (i.e. the FICO score of the business owner). The FICO score is merely a datapoint that in some cases may shed some light on how financially responsible an individual is with their money (i.e. can I trust that you won’t screw me if I loan you this money). But the business owners FICO score has no baring on whether that business has a good product, strong sales, a growing customer base, or is an overall healthy business. How did we get here? Over time bankers have lost sight of one of the C's in the 5 C's of lending, Character. A significant amount of time and diligence is necessary to get a good bead on an individuals character. Because small business loans are inherently low in volume, the cost of originating a small business loan often does not justify the economics on the loan. Thus, banks have defaulted to relying on a small business owners credit score.

So where does this leave us? Without government subsidies (i.e. SBA loan guarantees), the traditional lending model for small businesses falls flat on its face. Late last year SBA Administrator, Karen Mills, said:

"We were able to raise the guarantee on SBA loans to 90%, and reduce or eliminate the fees. It worked. SBA lending roared back. We were able to bring 1,200 lenders back to SBA lending who had not made a loan since 2007. SBA lending quickly went back up to pre-recession levels as we helped to fill the gap in the marketplace."

This is a staggering statement that demonstrates the fundmental flaw that has evolved. The fact that the traditional small business lender has to rely on near risk-free subsidies to exist, spells trouble for the future of small business lending. It is clear that reform is needed, and alternative funding vehicles are going to become increasingly important.

House Passes Bipartisan Jumpstart Our Business Startups (JOBS) Act

Thu, 08 Mar 2012 19:51:00 +0000

Today was a big day for American small business and entrepreneurship. The House showed that they can in fact work together, even in an election year! The Jumpstart Our Business Startup Act was passed with overwhelming bipartisan support (390-23).

"The bills would make it easier for small companies to go public by providing them a temporary reprieve from Securities and Exchange Commission regulations; remove SEC restrictions preventing small businesses from using advertisements to solicit investors; and remove SEC restrictions on "crowdfunding" so entrepreneurs can raise investment capital from a large pool of small investors."

"They also raise from $5 million to $50 million the ceiling for shares a private company can sell as part of a public offering before having to register with the SEC, raise the SEC registration threshold from 500 to 1,000 shareholders and increase the number of shareholders permitted to invest in a community bank from 500 to 2,000."

Though this is a great win, we have been down this road before with similar bills that have passed the House with overwhelming support, only to be stalled in the Senate for months. Hopefully this time is different and Democrats and Republicans can put their differences aside and show the American people that they can come together and pass smart legislation that is good for the American people (even in an election year).

New $30 Million Lending Fund Excludes Main Street Businesses

Fri, 03 Feb 2012 17:34:00 +0000

Citi and Next Street recently announced a partnership to create a new $30 Million Small Business Lending Fund. Although the initiative is good for many Small Businesses it verfies an ongoing trend away from Main Street Small Business lending which we define as Small Businesses that have revenue ≤$1,000,000 and capital needs ≤$100,000.

Lets take a closer look at this new fund's lending criteria:

1) To qualify for financing, Small Businesses are required to earn between $3 million and $60 million in annual revenue

2) Each business must have at least of 5+ years of operating history

3) Loan sizes are expected to range from $1.5 million to $2 million

It is evident that Main Street Small Businesses have once again been left out of the fold. Bolstr is designed to help add additional liquidity to this underserved Main Street Small Business market. For more information and facts on the ongoing trend away from main street small business lending see our post Small Business Lending is Up, But Main Street still in the Woods...

Small Business Lending is Up, But Main Street still in the Woods...

Wed, 18 Jan 2012 02:07:00 +0000

Recently the Thomson Reuters/PayNet Small Business Lending Index was released. This Index tracks the volume of new commercial loans and leases to Small Businesses and is indexed so that January 2005 equals 100. It is always good to Index Small Business data since Small Businesses are typically more sensitive to changes in economic conditions than larger businesses. Below is the latest index which represents seasonally adjusted data for the period January 2005 - November 2011:

As you can see the results appear to be promising as the Index shows that Small Business Lending increased by roughly 18% over the last year. Sounds great right? It appears that way on the surface, but since the data for this index represents Small Business Loans <$1,000,000 I wanted to dig a little bit deeper and identify how Main Street Small Businesses have been fairing. For the purpose of this post I am classifying Main Street Small Business Loans as being <$100,000. What I found was a systematic trend away from Main Street Small Business Lending, not only since the recent economic downturn, but over the past 12 years. The following chart represents the trend of Small Business loans by size, as a percentage of Total Small Business Loans. The data is indexed to 100 starting in 1999 and was taken from the SBA's Office of Advocacy.

As you can see over the past 12 years Small Business Loans under $100,000 have steadily declined as a percentage of Total Small Business Loan volume. Main Street Small Businesses have been progressively losing their fair share of origination, while larger businesses have not. Why? One hypothesis is that financial institutions consider small volume loans (to Small Businesses) to be not only riskier, but costlier to originate, regardless of economic conditions. As banks continue to face additional regulatory pressure this trend does not appear to be slowing. It is clear that although there has been some improvement in overall Small Business Lending Volume, Main Street Small Businesses continue to struggle to access the capital they need to operate their businesses and grow.

SEC Committee Discussion on General Solicitation

Wed, 04 Jan 2012 22:57:00 +0000

On Friday (Jan. 6th), the SEC Advisory Committee on Small and Emerging Companies is planning to hold an open discussion to discuss relaxing current restrictions on general solicitation and advertising in exempt offerings of securities. Obviously, general solicitation is the backbone of the concept of crowdfunding. Without general solicitation, a Small Businesses' ability to access the capital it needs to maintain and grow will continue to be challenging. This is an important discussion and one that is particularly relevant in light of recent SEC allegations that an investment adviser used the social network Linkedin to defraud investors (Article can be found here).

The financial system will always be plagued with folks looking to defraud investors and we should do everything in our power to protect investors from those threats. That being said, in no way do I think that these threats should impede the legislative body from passing smart regulatory changes that will increase the flow of capital and give small business the opportunity to flourish.

At most, this should serve as support that crowdfunding intermediaries should continue to be an essential part of any legislation. Designated intermediaries will add transparency to the market to ensure that the integrity of the legislations' intent is preserved. Any sort of intermediary oversight should be carefully crafted to ensure that this oversight does not become onerous hoops to jump through or costs to be incurred. The current broker dealer filing requirements price intermediaries out of the process of facilitating an end to end solution for small businesses because of the cost associated.

We believe in this legislations' mission. We set out on the same one over a year ago in order to develop a crowdfunding application that works within the current regulatory environment. We are proud of what we have created today and look forward to the possibilities being contemplated tomorrow!

New Crowdfunding Bill on the Block: Why S.1970 Over Does It

Thu, 15 Dec 2011 20:57:00 +0000

On December 9 The Crowdfund Act (S.1970: Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure of 2011) was introduced by Sen. Jeff Merkley (D-OR) and Co-sponsored by Michael Bennet (D-CO) and Mary Landrieu (D-LA). This bill developed out of deliberation on crowdfunding legislation within the Senate Subcommittee on Securities, Insurance, and Investment. Ever since the original crowdfunding bill (H.R. 2930: The Entrepreneur Access to Capital Act) passed the House with great bi-partisan support, concern over investor protection, and the diminishment of State authority to regulate securities transactions led to healthy debate within the Senate.

Following the passing of H.R. 2930 Sen. Scott Brown introduced S.1791, The Democratizing Access to Capital Act, which virtually mirrors the bill that passed the House in spirit, but lowers the cap on individual investments to $1,000 per person, per year, from $10,000, or 10% of annual income (the lesser of the two) in the House version. In addition, Sen. Brown's bill preserves some of the State's regulatory authority by requiring that crowdfunding Issuers be subject to registering the securities with the State the Issuer resides in, or any State with investors that represent 50 percent or more of the aggregate amount of the money raised (for a complete analysis of the differences between H.R. 2930 and S.1791 click here).

This brings us back to latest crowdfunding legislation to hit the Senate for debate: S.1970, The Crowfund Act. It is clear that each draft of crowdfunding legislation has resulted in additional measures that favor investor protection, and state regulatory authority. We think this is a good thing. In order for crowdfunding legislation to effectively aid small businesses, and help our country create jobs investor protection, and appropriate regulation is critical. However, there must be a balance. Over regulation would drastically reduce the ability for crowdfunding to accomplish its intent. Although there are many productive aspects within S.1970 the following two cause the intent of crowdfunding, which is to aid small business capital access, be smothered:

1) Investment Caps per Transaction: $500 for those with income less than $50,000; up to 1% of annual income for those making greater than $50,000 but not more than $100,000; and up to 2% of annual income for those making greater than $100,000

2) Cap on Aggregate Investments per Year: $2,000 for those with income less than $50,000; up to 4% of annual income for those making greater than $50,000 but not more than $100,000; and up to 8% of annual income for those making greater than $100,000

Lets think about what this means. If you have an annual income of $50,000 under S.1970 you may only invest $500 in any single business per year, and a total of $2,000 across different business ventures per year. Although we agree that tying investment caps to annual income is a positive measure, these caps prevent the ability for investors to effectively diversify, and still have enough capital at stake per investment to make a meaningful return. In addition, it drastically dilutes the ability for small businesses to effectively utilize a crowdfunding exemption to meet their financing needs. For a solid high level overview of the various crowdfunding bills in Congress today see Bill Carleton's latest post: Third #crowdfunding bill is no charm.

Senate Hearing on Crowdfunding Investor Protection

Fri, 09 Dec 2011 22:15:00 +0000

On December 1, the Senate Banking Committee held a hearing titled “Spurring Job Growth through Capital Formation While Protecting Investors.” This hearing covered many topics and facets of legislation, but for the purposes of this post, will focus on the areas pertaining to crowdfunding investment securities. Overall, there has been tremendous support for the enactment of some sort of crowdfunding legislation that would enable Small Businesses to pool small investments from a large group of people in order to access the capital they need to maintain and grow their businesses. This hearing focused on investor protection, which in our minds is one of the most important facets of any sort of crowdfunding legislation that may be put into place. We believe that the level of capital individuals will put to work will increase significantly if they are confident in the integrity of the system, and have the opportunity to make a return in the process. Crowdfunding donations can only take small businesses so far, so in order to free up the level of capital needed to truly help small businesses across the country, investments are needed.

It appears that the crowdfunding opposition primarily focused on a specific component of the proposed legislation, mainly, the inclusion of a federal exemption for crowdfunded securities that would eliminate state oversight. During the hearing the two major opposing arguments came from Jack Herstein, President of the North American Securities Administration Association (NASAA), and John Coffee, a law professor at Columbia University. Mr. Herstein believes that the proposed bills would create a massive hole in the investor protection safety net. He does not generally oppose the idea of crowdfunding, but believes that the regulatory oversight should remain at the state level. In essence, it is his view that states possess the best ability to oversee small transactions.

Bolstr is not opposed to State oversight, as long as it doesn’t consist of costly and onerous reporting measures. In Mr. Herstein’s written testimony he provided amendments to the legislation that would appease the concerns of NASAA. Below we have provided those suggestions:

“If regulatory authority is preserved for the states, NASAA will pursue the development of a model exemption for crowdfunding that uses many of the components of S. 1791. We have completed an initial draft of a model exemption that includes the following elements:”
• An aggregate offering amount to $500,000 over a twelve month period.
• Individual investments are limited to $1,000 per year, per offering.
• It uses a one-stop filing in the state of the issuer’s principal place of business. The issuer must provide the home state with contact information and other basic information about the company, and the home state will share the information with other states upon request.
• The issuer has the choice whether to use an intermediary or not.
• To inform investors, the issuer must make basic disclosures on its website, including its business plan and proposed use of proceeds. Boilerplate language will be developed to provide investors with important information about the general investment risks of crowdfunding.
• The issuer will be required to escrow investor proceeds until it reaches at least 60 percent of the target investment amount.
• Individuals and companies that have criminal records or have violated securities laws will be precluded from using the exemption.

On the face, many of the amendments here do not sound unreasonable. We would want to see the investment threshold match those that are outlined in H.R.2930 ($10,000 or 10% of annual income – lesser of) as well as ensure that intermediaries are not subject to broker dealer registration.
Although Prof. Coffee gave a very charismatic and colorful testimony to the Committee, he failed to address the significant cost and complexity of raising investment capital in the current regulatory environment. Prof. Coffee states in his testimony, that “…a ceiling set at the lesser of $10,000 or 10% of annual income is confining, and would in my judgment make most fly-by-night issuers still prefer Rule 504.“ He suggests here that because there is a cap on the level of investment, individuals would rather utilize Rule 504 than take advantage of a crowdfunding exemption. This statement fails to take into consideration that most states have unique filing requirements, so legal assistance is needed to ensure regulatory compliance is upheld across various states. This legal assistance comes at a tremendous cost to small businesses.

Many main street businesses do not have a bevy of accredited investors in their network to source capital from, and the number of unaccredited investors in their network is subject to a state cap regulating the number that can participate. On average, excluding extreme outliers, the number of unaccredited investors that a small business can accept investment capital from is ~20 individuals. That means a business looking to raise $100,000 of capital from their friends and family (assumed to be in the same state) is going to need an average investment of $5,000 which is right at 10% of the national median income in the United States (~$50,000 per the census bureau). This is extremely close to the threshold outlined in H.R.2930 and a significant amount of capital to raise from such a small group of unaccredited individuals. By utilizing a crowdfunding exemption, this business would be open to solicit smaller amounts of capital from a larger group of people to ensure success of their capital raise and file one standardized document that would enable them to reach out to folks in other states without the burden of hiring a lawyer to educate them on the regulatory environment.
During his testimony, Mr Coffee also suggested that an intermediary should be registered as a broker dealer. The cost associated with broker dealer registration, and on-going compliance would force intermediaries to employ a costly revenue model to offset the cost of compliance. This cost, in turn, would inevitably be passed on to the Small Business.

Intermediaries are critical in providing transparency to crowdfunding investments. They ensure that every transaction is done in a regulatory compliant way, and they document the entire process providing a clear paper trail of each transaction. This shines a light on, what is today, an offline and fragmented process where small businesses accept cash injections from friends and family without thought of regulatory compliance Crowdfunding intermediaries are a valuable tool for small businesses, as they allow them to seamlessly, and cost effectively, source capital by utilizing technology. Requiring them to register as a broker dealer would drastically prohibit their ability to do this.

A Look at Crowdfunding with Bolstr Today

Mon, 28 Nov 2011 18:49:00 +0000

Ever since Rep. Patrick McHenry's Entrepreneur Access to Capital Act passed the house with an overwhelming majority (407 to 17), there has been much publicity around crowdfunding, and what it means for startups, angel investors, and small businesses. At Bolstr, we have been interviewed multiple times over the past few weeks regarding what this legislation means for us, and other traditional crowdfunding platforms. Prior to the introduction of crowdfunding legislation we embarked on a mission to solve the very problem H.R. 2930 is intended to fix, and do so within the current regulatory system. As a result, I thought this would be a good opportunity to elaborate on how crowdfunding on Bolstr works today within the current regulatory confines, and how H.R. 2930 will impact us.

The "Typical" Crowdfunding Model

First, lets take a look at the traditional model for crowdfunding. The majority of U.S. platforms, such as Kickstarter, and IndieGoGo do not support the ability to raise investments for your business. Instead, they allow users to solicit donations from any individual or entity in support of a specific cause or project they are trying to fund. In exchange, the donors receive different levels of perks usually based upon the size of their donation. For example, if I wanted to raise $15,000 to fund a documentary on poverty in America, I may post a short video on the importance of creating awareness about poverty, and solicit donations from people interested in supporting the cause. In exchange I may offer anyone who gives at least $500 the opportunity to have their name in the credits, and anyone who donates at least $1,000 to receive a free DVD of the completed documentary. The key here is that because the money raised for each project is a donation, not an investment, U.S. securities laws do not apply.

Bolstr: A Crowdfunding Investment Tool

Unlike typical crowdfunding platforms, Bolstr's method allows entrepreneurs and small businesses to raise capital, and exchange a stake in their business for the capital raised. In order to raise capital from a large number of people across different states, and include individuals who are not millionaires, compliance with state by state regulatory rules is needed. This process is extremely costly, timely, and confusing, as each state has different securities laws that would apply to the capital raise. This creates a tremendous barrier to entry for a lot of entrepreneurs, particularly those that have a large number of folks in their network who are willing to support them through small investments. At Bolstr we have created a simplistic fundraising tool that demystifies the process of raising investment capital through step-by-step guidance via a private placement. The Bolstr platform guides small businesses through the confusing regulatory obstacles, and enables them to cost effectively crowdfund investments of all sizes from their network and community.

Importance of Bolstr to Crowdfunding Investments

Last week Bolstr was mentioned in Business Insider as a key crowdfunding platform that has the potential to disrupt the market for angel investing. To elaborate, lets say you have 100 people in your personal network, and, if given the opportunity each is willing to invest $100 in your business for a total of $10,000. Under normal circumstances raising investments from so many people in such small increments is simply not feasible. The cost & time associated with structuring term sheets and navigating compliance with the current securities laws ("Blue Sky Laws") for each investor would most certainly outweigh the benefit of the $10,000 investment. In fact, the legal work alone could cost more than the investment itself! That is where Bolstr comes in. We provide:

1) Step-By-Step Guidance:

We do the hard work for you. Bolstr has created a simple step-by-step process to create a professional business pitch, manage potential investors, determine fair and mutually beneficial deal terms, and remain legally compliant. We are a plug and play fundraising tool!

2) Easy to Follow Legal Compliance:

Bolstr cuts out the confusing and expensive work of drafting deal terms that is often a barrier to entrepreneurs and small businesses seeking capital. We walk you through the creation of straightforward legally compliant term sheets, and help you easily share, store and manage all legal documentation.

3) Mutually Beneficial Deal Terms:

Bolstr has many resources, tools, and simple financial calculators that help you create fair deal terms for you, and your investors. We have dumbed down the regulatory process, making compliance easy and straightforward.

4) Social Deal Management Tools:

When raising money, keeping your supporters engaged is Key. Bolstr has transformed the process of raising investments into an interactive and social experience allowing both small business owners and investors to easily communicate, share information, and manage deal flow during the investment process and after.

5) Secure Online Transactions:

Bolstr makes it easy to execute legal documentation, and manage investor interactions directly through a secure online platform

Impact of H.R. 2930 on Bolstr

In order to crowdfund investment capital within today's regulatory environment, startups and small businesses raising money on Bolstr must do so via a private placement. This means that Bolstr Entrepreneurs must have a prior substantial relationship with the investors that participate in their crowdfunding investment campaign. In other words, we provide tools and resources for businesses to raise capital by giving them the ability to privately solicit investments from people in their personal network and community.

Although Bolstr's fund raising tools are effective in helping entrepreneurs access capital in today's regulatory environment, we continue to believe the current securities laws written in the 1930's are outdated. H.R. 2930 is designed to update these laws, and if it passes the Senate will dramatically improve the ability for entrepreneurs to meet their financial objectives through crowdfunding. This legislation will enable the public solicitation of investment capital under a federal securities exemption, and will increase the number of potential investors in one's business. As we continue to follow this legislation, Bolstr remains one of the few crowdfunding platforms that enables entrepreneurs to crowdfund investment capital in the current regulatory environment. Improving capital access for entrepreneurs, and helping to create jobs in our country is the primary reason we founded Bolstr. If H.R. 2930 becomes law it will drastically improve our ability to do so.

Click here to read more about H.R. 2930 and crowdfunding legislation in the Senate.

Two ways you can support Crowdfunding tomorrow!

Wed, 16 Nov 2011 20:25:00 +0000

Over the past few weeks we have been keeping the Bolstr community up to speed on the latest developments regarding crowdfunding legislation. We have given our take on the legislation and had some great conversations with members of the community. The question that comes up frequently is, what can I do to help? Besides contacting your state senators to express support for the bill, tomorrow there will be two great opportunities to get the word out and get involved.

1. Tomorrow morning (8am to 10am ET) there will be a rally in Washington D.C. where supporters of the bill will be gathering in front of the Securities & Exchange Commission ("SEC") to voice their support of the legislation. Rep. Patrick McHenry (R-NC), who introduced H.R. 2930, is scheduled to speak at the rally. If you are a supporter of this legislation and can make it down to D.C., this will be a great opportunity to exercise your right to organize in support of this bill.

2. Tomorrow afternoon, the SEC plans to host its 2011 Government-Business Forum on Small Business Capital Formation. This is an annual event that includes a full day of speakers, panelists, and Q&A opportunities. The full agenda for the forum can be found here. This is a great opportunity for supporters to show support by participating in the public Q&A discussions. For those that can't make it down in person, a live webcast will be hosted on the SEC's homepage from 9am to 1pm ET.

Analysis of Senate Tweaks to Crowdfunding Legislation

Sun, 13 Nov 2011 18:07:00 +0000

On November 3rd, 2011 the House of Representatives passed Patrick McHenry's bill (H.R. 2930) with overwhelming bi-partisan support (407 to 17), and President Obama immediately issued a statement also in support of the legislation. This bill provides a federal exemption for securities that are raised through crowdfunding, and is a tremendous step forward in helping small businesses access the capital they need to grow and create jobs for our country (please see Crowdfunding Passes the House! for more information).

Now that the bill has moved on to the Senate some significant tweaks have been made, including a new name! The "Democratizing Access to Capital Act of 2011" (bill S.1791) was presented by Senator Scott Brown earlier this month, and contains three notable differences from McHenry's version:

1. Investments Capped at $1,000: Individual investments are limited to $1,000 per person, per year, as opposed to McHenry's $10,000, or 10% of annual income (the lesser of the two)

2. Must be incorporated, Must use a Crowdfunding Platform: In order to raise money through crowdfunding with a federal exemption the entity raising the money must be incorporated under, and subject to State law, and a "crowdfunding intermediary" must be used

3. Registration in at least one State may be Required: The entity raising investment capital through crowdfunding may be subject to registration of the securities with the State the entity resides in, or any State with investors that represent 50 percent or more of the aggregate amount of the money raised.

The third major change is still a bit fuzzy, but it appears that Senator Brown is attempting to allow the States to have a larger regulatory role in monitoring crowdfunding transactions than McHenry's bill. This may be a key element that enables many in the Senate to get comfortable with passing crowdfunding legislation. Capping investments at $1,000 is also very significant. On one hand it limits exposure to unaccredited, or unsophisticated investors, however, on the other hand it substantially reduces the ability for larger and more sophisticated investors to help small businesses achieve their fundraising objectives. Although the $1,000 limit is a very prudent starting point, tying in McHenry's cap of $10,000 or 10% of annual income, and applying it to accredited investors only (those with annual income of $200,000 or more) would substantially improve the positive impact crowdfunding legislation would have on small businesses, and job creation.

(click here for more information on the definition of an accredited investor)

"Shop Small" on Small Business Saturday - November 26!

Fri, 11 Nov 2011 17:31:00 +0000

Saturday November 26th marks the second annual Small Business Saturday. This is a movement started by American Express to encourage shoppers to commit to "Shop Small" and purchase at least $25 at a local small business or merchant. By registering online you can receive rewards of up to $25 back on your purchase. We are very pleased that American Express has taken this initiative, as small business growth is at the heart of our country's economic prosperity, and ability to create jobs.

Help Bolstr the economy by making the pledge to Shop Small Business on November 26th! Click here for more information on how you can make the pledge and Bolstr Small Business!

Crowdfunding Passes the House!

Fri, 04 Nov 2011 15:52:00 +0000

Earlier this week we wrote a blog post titled, Congress to Vote on Crowdfunding Legislation, about a crowdfunding bill, The Entrepreneur Access to Capital Act (H.R. 2930), that was scheduled to hit the House floor this week. We spoke about the merits of this bill and the impacts it would have on small businesses across the country. On Wednesday, the Executive Office of the President released the following statement in support of the bill:

"The Administration supports House passage of H.R. 2930. In the President’s September 8th Address to a Joint Session of Congress on jobs and the economy, he called for cutting away the red tape that prevents many rapidly growing startup companies from raising needed capital, including through a “crowdfunding” exemption from the requirement to register public securities offerings with the Securities and Exchange Commission. This proposal, which would enable greater flexibility in soliciting relatively small equity investments, grew out of the President’s Startup America initiative and has been endorsed by the President’s Council on Jobs and Competitiveness. H.R. 2930 is broadly consistent with the President’s proposal. This bill will make it easier for entrepreneurs to raise capital and create jobs. The Administration looks forward to continuing to work with the Congress to craft legislation that facilitates capital formation and job growth and provides appropriate investor protections."

The bill hit the House floor yesterday and was passed with astounding bipartisan support. We are thrilled that our representatives realize the value in this bill and what it means for small business growth and jobs in this country. So what's next for bill H.R. 2930? Next stop, the Senate.

Congress to Vote on Crowdfunding Legislation

Tue, 01 Nov 2011 20:28:00 +0000

Over the past several months support has grown for new legislation that would simplify, and update the current regulatory rules around soliciting investment capital for one's business. The Entrepreneur Access to Capital Act (H.R. 2930) is scheduled to hit the Congressional floor this week, and is designed to substantially increase the ability for small businesses to access investment capital through general solicitation. The House bill would allow individuals to buy stakes in small businesses of up to $10,000, or 10% of their net income (the lesser of the two) with a federal exemption from registration. It would also allow small businesses to publicly solicit up to $1 million of investment capital from individuals across the country, or up to $2 million when audited financials are provided.

Since the current regulatory rules were largely written during the 1930's, today's social networks, and person-to-person connectivity through technology were not considered. In a time where small businesses across the country are struggling to obtain capital to operate, and grow this legislation is designed to fill a key funding need that will help spur small business growth and job creation.

Disclaimer:

Bolstr is a fundraising tool that helps small businesses raise capital privately, and under the current regulatory guidelines. However, we support this legislation, and believe it will substantially improve access to capital for small businesses.

Small Business lending continues to stumble

Sun, 16 Oct 2011 17:56:00 +0000

So the new figures looking at small business lending activity in the second quarter, or lack thereof, are out and they continue to be dismal. Though this is the lowest decline since 2008, it is clear that the small business lending market is having an extremely difficult time rebounding out of the recession. Small businesses are, without doubt, the core growth engine of the U.S. economy. Thus, it's clear that the lending hardships facing the small business community continues to be a catalyst of the broader economic conditions we all are facing. Despite these hardships facing the small business lending market, the large and medium-sized lending market continues to rebound.

This table highlights a few issues that are broader than the small business lending market rebounding out of a recession. As you can see, the small business lending market, historically, has not seen the sort of growth exhibited by the market for large and medium-sized businesses. With additional regulatory pressure on bank lending practices stemming from the fallout of the credit crisis, and the fact that the origination costs associated with a small business loan often make it uneconomical for the lender, should we ever expect to see the this market fully rebound at all? Many economists think the answer to this question is "No". The lack of small business lending makes it clear that we are in need of alternative funding mechanisms to help small businesses access the capital they need to maintain and grow. Enter: Bolstr.

Increase in Bank Lending Does Not Aid Main Street Business

Mon, 19 Sep 2011 20:42:00 +0000

Today the Federal Reserve reported that banks increased their commercial and industrial loans (business loans excluding real estate) by roughly $61 billion, or 6.2% from the prior period (January – August). It is important to note that the majority of this capital went to midsize businesses, not Main Street businesses. Also of note is the reason why this increase in lending has not translated to job creation. According to the WSJ:

…the lending is largely to replace machinery and make repairs and upgrades, as exports are boosted by the falling dollar. Little of the lending is funding the kind of expansion of business that would generate robust hiring.

Mid-size businesses are still very risk adverse during this uncertain economic environment, so instead of using this additional capital to invest in job creating initiatives such as building new factories, these loans were used to finance maintenance. The fact is that Main Street small businesses (retailers, restaurants, dry cleaners, florists etc…) are still struggling to access the capital they need to not only grow, but in many cases to survive. These are businesses that would utilize capital to invest in job creating initiatives such as a store renovation, or opening a second location. At Bolstr, it is our mission to empower Main Street businesses to create jobs. Helping them access capital is a key step!