Could Private Equity Become Even More Important to Small Businesses?
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Could Private Equity Become Even More Important to Small Businesses?

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Private equity has for a very long time been a major influence on the small business community, but it appears as if it could soon hold an even more important role.

Last week, the House of Representatives approved a bill allowing private equity firms to bypass the need to register with federal regulators. Proponents of the bill hope that it coul improve the way small businesses receive their capital. The bill is being called the Small Business and Capital Access and Job Preservation Act, and passed with a vote of 254 for and 159 against, according to The Washington Post.

A Changing Climate

The new act may not seem like a game-changer at face value, but there’s no getting around the fact that it could alter the climate of small business should it get to the White House. Right now, the majority of investments firms holding funds over $150 million must register with the Securities and Exchange Commision. The Dodd-Frank financial reform law is responsible for much of this, including the need for such firms to file regular reports with the commission. The passing of this bill, however, would negate many of the rules associated with Dodd-Frank, thus opening up new avenues for small businesses of all kinds.

For those who are in support of the bill, the changes could make a world of difference for many small business owners. Many believe that the regulatory issues that are currently in place make it more difficult than is necessary for small businesses to get the funding they need from private investing firms. Regulation stops many of these types of groups from even forming at all, as some consider the headaches to be simply not worth the benefits. With the walls torn down, however, small businesses could gain a lot more in capital than what they’re experiencing at the moment.

Working Towards Improving Unemployment

The joblessness rate in America may be improving, but it still has a long way to go. Those who voted in favor of this new act feel as if it could potentially have a positive impact on the country’s unemployment rate, as more money being funneled into small business means more jobs. With the impending potential lift on restrictions, investing firms are not only going to have an easier time making their money available to small businesses, but they’ll be able to offer more, as well. Registering with the SEC can be exceptionally expensive, sometimes to the tune of $100,000. By eliminating the need for investing firms to pay these registration fees, they’ll be able to better funnel money into businesses that could truly benefit from it.

Not everyone is in favor of the bill, however, and it’s unclear as to how much of an impact it might have (President Obama has threatened to veto it should it ever hit the White House). Still, it could have a very large impact on the small business community if it were to go into effect, and is worth discussing on this fact alone.

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