In a Detroit Free Press opinion article, Elisabeth Gerber writes that pending legislation that would allow nonaccredited investors to purchase shares of Michigan companies could provide a great tool to help small businesses raise capital and spur local economic development. The op-ed was co-written with Daniel Gilmartin, executive director and CEO of the Michigan Municipal League, and Chris Miller, downtown development authority and economic development coordinator for the city of Adrian, Michigan.
Investment crowdfunding allows non-accredited investors to purchase securities in private businesses. Currently, the sale of these securities is limited to institutional buyers or accredited investors — those who earn at least $200,000 a year or have a net worth of $1 million or more. The proposed Michigan plan is laid out in HB 4996, a bill introduced by Representative Nancy Jenkins and 11 colleagues in the House of Representatives this September. It would allow Michigan residents who are not considered accredited investors to invest up to $10,000 in a Michigan business in exchange for equity. The bill passed the House with a 108-0 vote and will go in front of the Senate Banking Committee this week.
In the article, Gerber and her colleagues note that this bill seeks to address the number one problem of small businesses – raising capital. They state:
"Existing small businesses, which provide the greatest employment growth opportunity, also struggle finding capital, especially in the wake of the Great Recession. HB 4996 can help inject their efforts with local capital as well, and will allow the people in their own communities — people in Michigan — an opportunity to support businesses they know best."