Small Business Capital Bill Seeks Less Regulation for VC Investment

There’s a lot of lip service in Washington about making a better climate for startups and small businesses. So it’s disappointing to listen to that a law designed to just do that’s stalled indefinitely as a result of political posturing.

But that’s exactly what seems happening with the Small Business Capital Access and Job Preservation Act H.R. 1105.

The bill was introduced by Congressman Robert Hurt (R-Virginia) earlier this year. It was an try and calm down one of the vital regulation on private equity companies like venture capital and growth capital firms.

Why Startup Investors Need Less Regulation

Simply put, these firms put money into startups like Facebook and Twitter once they are small and grow them into huge companies. These companies in turn create jobs and opportunities for smaller contractors and other small businesses.

Up until recently, private equity firms were assumed to cope the cash of more sophisticated investors less short of protection by the government.

So federal regulators who monitor publicly traded stock on Wall Street didn’t bother with these groups much if in any respect.

But all that modified with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Now many private equity firms have to register with federal regulators meaning greater costs and larger regulatory hurtles.

In an official release supporting Hurt’s bill, House Committee on Small Business chairman Sam Graves (R-MO) explains :

The Dodd-Frank Act creates excessive red tape that inhibits growth, and the costly new requirements on smaller private equity funds is a transparent example. H.R. 1105 helps reduce that regulatory burden on private equity funds in a standard sense way, in order that private sector capital isn’t unnecessarily restricted and these funds can remain keen on investments that help grow the economy.”

In short, critics of Dodd-Frank think the recent regulations on private equity may well be slowing the flow of capital to startups.

Small Business Capital Bill Might not Move Forward

Earlier this month, supporters of Hurt’s bill from both parties helped pass it in the home 254-159.

But opponents of the recent bill like Rep. Maxine Waters (D-Calif.) say relaxing regulation, even on private equity firms, is a nasty idea. And the White House has threatened to veto the bill meaning the Senate is unlikely to even consider it anytime soon, reports The Washington Post.

Certainly, there’s need for some regulation where risk to investors or the general public is anxious. But creating regulations that potentially hurt business and investment is a step within the wrong direction.

Image: U.S. House of Representatives

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