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Bill enhances small business connections
SEC Small Business Advocate Act improves federal communication.
New legislation is expected to help Michigan’s small businesses connect more efficiently with the federal government.
The SEC Small Business Advocate Act was introduced in Washington, D.C., last month by U.S. senators Gary Peters, D-Michigan, Heidi Heitkamp, D-North Dakota, and Dean Heller, R-Nevada.
The act’s broad aim is to create established lines of communication between small businesses and the federal government, helping small businesses advocate for regulations and policies that will support the growth and development of local small businesses.
When it comes to federal rules about business, West Michigan’s small businesses don’t feel like they have a voice in the matter, and a bill like this could possibly help, said Aaron Schaap, founder of The Factory, a downtown co-lab work space at 38 W. Fulton St. filled with small businesses and entrepreneurs.
Schaap also is a small-business owner who founded Grand Rapids-based digital product company Elevator Up.
“It’s nice on (the federal government’s) side that they can get real information from real people instead of a summary,” Schaap said. “Any time you can hear directly from the horse’s mouth, it helps.”
Schaap has heard and experienced a number of the issues that likely will be brought before the federal government, should the bill pass. There are three main challenges facing local small businesses that he’s seen come up over and over again in conversations. One is the ability to hire people from overseas.
“There might be really good talent that doesn’t live in the states that I might like to bring here full time. If you’re open to do that, that opens up a whole group of candidates I’m not showing you right now, but the whole process is overwhelming …”
He said the second challenge is the “skyrocketing” cost of real estate, although Schaap said he isn’t sure whether it’s an issue the government can help with unless it’s from a tax standpoint.
But the third issue is something he feels the federal government could work on with small businesses, and that’s “how expensive health care is.”
“That takes up a significant amount of our cost and it’s also something we have no control over. It’s something that continues to rise every year with no cap. Either you don’t pay it, or you just have a business model that keeps covering everything coming up. At some point, that seems a little out of control,” Schaap said.
“If you only have five to 10 employees, it’s almost impossible to get insurance for your employees. It’s way too expensive. Nor does it make sense to tell your employees, ‘Oh, you just figure out your own insurance.’”
Small businesses currently make up almost half of the private-sector workforce in the U.S. and create about two-thirds of the country’s net new jobs, according to the U.S. Small Business Administration.
The senators behind the act are from states that can attest to those numbers. According to Heitkamp, North Dakota’s small businesses make up 96 percent of the state’s employers. In Nevada there are more than 230,000 small businesses employing more than 428,000 workers, Heller said.
Michigan is no different. Small businesses currently make up about 98 percent of Michigan’s businesses and employ 50 percent of the state’s workforce, according to Allison Green, press secretary for Peters.
Those small businesses regularly face challenges in complying with federal rules issued by the Securities and Exchange Commission that don’t always distinguish between large and small businesses. Since access to capital is critical for small businesses to succeed, small businesses need to have a voice when it comes to potential regulations that would impact their ability to access the resources they need, Green said.
“As the engines of economic growth in Michigan and across the country, it is vital that small businesses have their voices heard in the federal rule-making decisions that impact them,” said Peters, who is also member of the Committee on Small Business and Entrepreneurship.
“I’m pleased to join my colleagues to introduce this bipartisan legislation, which will improve communication between small businesses and federal regulators and strengthen the ability of small businesses to compete and succeed.”
There is a new wave of people who want to work independently, Schaap said.
“People don’t like to work for companies. You’re going to have all these issues you didn’t have before where everyone wants to be freelance or independent. People are feeling more confident to start their own ventures,” he said. “Maybe that’s what the government is seeing. Obviously, we still have a lot of large companies, but maybe a lot of those companies are shrinking a little bit. We have a much bigger small business groundswell than we’ve had before.”
Here’s what the bill would do: The SEC Small Business Advocate Act would create a permanent Office of the Advocate for Small Business Capital Formation. This office would then assist small businesses and their investors with problem solving, giving feedback on proposed regulations, and finding policy points that could be changed in order to better help small businesses succeed, Green said.
In addition, the act would establish the Small Business Capital Formation Advisory Committee made up of 10 to 20 appointed members who would represent small businesses, investors and market participants. The committee would provide the SEC chair and staff with counsel on policies that could impact, in particular, small business capital raising, securities offerings and reporting, she said.
“The Small Business Capital Formation Advocate and Committee would give Michigan small businesses a voice in SEC rulemaking to proactively develop federal policies that help emerging businesses raise capital and thrive. Giving small businesses a seat at the table results in innovative policies,” Green said.
“For example, the SEC equity crowdfunding rule, developed with small business input under the JOBS Act, helps startups raise money from a community of small investors through a crowdfunding model, giving more companies a chance to succeed. With a permanent voice at SEC, small businesses can generate innovative policies like the crowdfunding rule and ensure that new rules, such as reporting requirements, are not overly burdensome for small business owners.”
Here’s one example of what that would look like. Small startups that go public in order to raise more capital have to register with the SEC and must complete the same compliance and reporting requirements as major corporations. However, they must do this with fewer staff and resources than large companies, putting a strain on their finances and day-to-day operations, Green said.
“Senator Peters’ legislation would ensure that small startup companies would have a voice in the rulemaking process so that their unique needs and concerns, such as having fewer resources or smaller staffs, can be taken into account as the SEC determines new rules,” she said.