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Law Would Give Businesses Access to Capital Market

A new bill may help more small businesses get capital.

Companies that are just getting off the ground may have greater access to investments and capital with the recent approval of the Jumpstart Our Business Startups (JOBS) Act by both houses of Congress.

As Michael Cohn reports for Accounting Today, the legislature gave the bill the green light on Tuesday, a move that it hopes will open up capital markets to burgeoning businesses and subsequently shore up the struggling economy. In its review of the bill, the Senate added an amendment that would create protections for "investors in so-called 'crowdfunding' ventures," Cohn recounted.

He explains that the final product was a combination of earlier bills that failed, and will help make it more affordable to launch an IPO, establish a category of "emerging growth companies," enable small businesses to find investors through advertising and clear away restrictions on entrepreneurs to use "crowdfunding."

The passage of the bill is a sharp change in previous laws about private companies raising capital, according to a blog post by Sheppard Mullin Richter & Hampton LLP.

"Regardless of the outcome of reconciliation of the House and Senate versions of the crowdfunding exemption, the changes that appear all but certain to be implemented by the JOBS Act will fundamentally alter the methods companies have used to raise capital for the last 30 years," the law firm said.