U.S. Sen. Dave McCormick (R-PA) joined U.S. Sen. Andy Kim (D-NJ) to introduce legislation that would reduce barriers for early-stage entrepreneurs from using crowdfunding
The Amendment for Crowdfunding Capital Enhancement and Small-business Support (ACCESS) Act would allow early-stage companies to use crowdfunding to raise money while still maintaining investor confidence and market integrity, officials said.
“Crowdfunding can be particularly valuable for Pennsylvania entrepreneurs who may not qualify for traditional financing or want to validate market demand before fully launching,” McCormick said. “By removing unnecessary barriers while maintaining investor protections, we’re unlocking greater capital for new businesses to take root in Pennsylvania and across the country — proving that smart regulation can mean more opportunity, not less.”
Currently, early-stage companies, as well as startups and small businesses, that raise $100,00 are required to have financial statements reviewed by public accountants before crowdfunding. Those filings can cost on average $10,000, the equivalent of 10 percent of the capital raised. The bipartisan bill would propose to raise the crowdfunding limit from $100,000 to $250,000 before requiring financial statement being reviewed by an independent accountant, modernizing financial thresholds and focusing compliance where it matters most.
“Too often start-ups and small businesses face red tape and obstacles to capital that is a critical tool to their success, and in turn, their ability to give back to our communities, “ Kim said. “By modernizing outdated ‘one-size-fits-all’ requirements, we open doors for businesses and investors of all sizes and backgrounds to grow, while still looking after the overall stability and strength of our financial markets.”
The proposed rules would let startups raise smaller amounts through investment websites. Since 2016, crowdfunding has helped over 6,500 businesses raise nearly $2.4 billion across 8,400 investment rounds for early-stage companies, officials with the senators’ offices said. Pennsylvania ranks 5th in the total number of crowdfunding issuers, with more than 330 companies utilizing this funding opportunity since 2016.