JOBS Act opens fundraising doors for small firms

CNN Wire Service

It will soon be easier for small companies to raise money just like behemoths on Wall Street.

More access to fundraising, new investors and fewer regulatory burdens are all part of the Jumpstart Our Business Startups bill, which President Obama signed into law Thursday.

The JOBS Act, which received bipartisan congressional support, provides small businesses that need capital with many options that were previously out of reach. The provisions are aimed at helping fast-growing operations like biotech and tech companies, but mom and pop shops may benefit as well.

The Securities and Exchange Commission has several months to pass regulations fully implementing the law.

For startups or entrepreneurs in need of initial funds to launch an idea, the law redefines crowdfunding.

Previously, platforms like Indiegogo or Kickstarter offered companies a way to raise money from everyday folks. But contributors couldn’t buy shares in a company itself and take part in its profits and losses.

The new law allows a company to use crowdfunding for seeking actual investors. It can raise up to $1 million this way. To protect investors, those with a net worth of less than $100,000 may now invest 5% of their yearly income or $2,000, whichever is higher. Wealthier types can invest up to 10% of their income.