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Crowdfunding: Giving Minority Businesses Hope


The fact that the U.S. Department of Commerce Minority Business Development Agency felt compelled to prepare a January 2010 report “Disparities in Capital Access between Minority and Non-Minority-Owned Businesses: The Troubling Reality of Capital Limitations Faced by MBEs,” is disturbing. Given the economic power of small businesses (and most MBEs are small), it is frustrating that the laws passed and programs implemented have not enabled minority businesses to achieve economic parity when it comes to obtaining capital. Despite the odds, small and young Minority Owned Businesses (MBEs) create more jobs than non-minority firms (3.1 to 2.4 from 2004 to 2007) and generate tens of billions of dollars in revenues. This is despite being less likely to receive conventional loans than non-minority firms, more likely to be denied loans, and less likely to apply for loans after rejection.

One of the characteristics that makes the U.S. great is that voids in services are inevitably filled by enterprising people. Until about April 2012 the national crowdfunding sites were only able to legally operate as donation programs. The Jumpstart Our Business Startups Act signed into law by President Obama in 2012 changed the lending landscape. The law allows people in the general public to receive equity in a company in exchange for funding. This is a potential boon for small startup businesses and those with a successful track record and ready for expansion. The word “potential” is emphasized because the implementation of the law is waiting on the Securities and Exchange Commission (SEC) to write the rules for equity crowdfunding.

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