Home > business law, Crowdfunding, MILE Act, social entrepreneurs > Social Entrepreneurs and Small Businesses – Update on Intrastate Crowdfunding

Social Entrepreneurs and Small Businesses – Update on Intrastate Crowdfunding

A recent Detroit Free Press article highlights the success of Tecumseh Brewing Co, the first business in Michigan to utilize Michigan’s intrastate crowdfunding exemption to securities registration, commonly referred to as the MILE Act.

Crowdfunding: Potential for Start-up Businesses.

As the Free Press article explains, The story of Tecumseh Brewing Co highlights why equity crowdfunding is attractive to small startup businesses who may struggle to secure conventional financing.

“We went through bank after bank. They couldn’t justify giving out a loan to two guys starting a business,” said Kyle DeWitt, general manager and cofounder of Tecumseh Brewing Co.”

Without a doubt – the ability to reach a large pool of investors that were previously unreachable due to Securities Law restrictions is attractive to small businesses.

More States Enact Laws Permitting Intrastate Crowdfunding

Yes, as the Free Press article describes, states are realizing that intrastate crowdfunding can be a viable tool for small businesses. Per the Free Press’s calculation, 23 states have enacted laws permitting crowdfunding, and a dozen more states have proposed bills.

Crowdfund Insider, through  Illinois Crowdfunding Attorney Anthony Zeoli, recently provided a nice “big picture” update on the state of Intrastate Crowdfunding. Check out that article here

Problem Areas

potential abuse

Attorney Zeoli’s article also recognizes the problem areas of crowdfunding exemptions enacted by many states.  The obvious areas of concern often identified by regulators is the potential abuse of such exemptions by scammers and frauds, who may want to take advantage of an “unsophisticated investor.”

limited utility

Another such problem affects the “utility” of the laws; particularly, the limitation on real estate holding companies to utilize many intrastate crowdfunding exemptions.

Attorney Zeoli advises legislators to more narrowly tailor this exemption – I’d be in favor of a Michigan amendment such as is proposed in Illinois HB 3429.

With all of the development and revitalization efforts in Detroit, check out this recent article about the Brush Park Development, Grand Rapids, and other major cities, so long as disclosure safeguards are in place, why not make it as easy as possible for local investors to own a project in their local community?

Questions? Comments?

email: Jeshua@dwlawpc.com



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