Allowing for investments as low as $100 to $1,000, “crowdfunding” proposals before the Senate Banking Committee could open up an enormous pool of capital for small business entrepreneurs who badly need it, while allowing investors to get out from under the thumb of global corporate interests.

Hundreds of ventures have already been launched with the help of donation-based crowdfunding through sites like Kickstarter and Kiva. What if these willing donors were offered a stake in the venture? How much more working capital would that generate?

Most people are unaware that this type of local investing is virtually impossible for non-millionaires, or that the system is rigged to send our savings and investments to Wall Street, thanks to obsolete securities laws dating back to the 1930s that ground community investing to a halt.

A change in these laws could be transformative for our communities, our economy and our planet. If you currently have investments, try to pinpoint where that money is right now and what it’s doing in the world at this minute. Then ask yourself what the answer would be if a portion of that money were invested within 100 miles of your home.
The Senate Banking Committee is currently reviewing three proposals: HR 2930, which passed the House with bipartisan support in early November on a lopsided 407-17 vote, and two competing bills, S 1719 and S 1970.

HR 2930 would offer exemption from SEC requirements for businesses seeking to raise up to $1 million in capital, with individual investments capped at 10 percent of the investor’s income. Essentially, it would eliminate the regulatory hurdles that currently swamp crowdfunding campaigns. As the proposed new law caps investments at 10 percent of people’s income, it’s unlikely to bankrupt them, even if fraud occurs or the business fails.

The Wire covered this topic in depth in a November story, "Investing in Main Street," available at www.wirenh.com. In that story, economics researcher Michael Shuman put it succinctly. “Ninety-nine percent of the public is effectively unable to invest in the local half of the economy. That local half of the economy is probably the most significant creator of new jobs and economic well-being.”

Under existing law, it is nearly impossible for most of us to invest in local businesses because once you promise a financial return on an investment, it becomes a security. There are different security laws for accredited investors—essentially, individuals with a net worth of $1 million or more—and the rest of us. A small business cannot solicit such investments from the general public without going through a lengthy and expensive legal process.

The current laws are meant to protect us from fraud, but a system where people stay connected with their money in their community could offer a fair alternative to the system that gave us Bernie Madoff, Goldman Sachs and Freddie Mac.

Senators have indicated they are waiting to hear from the public on this issue.

S 1719 is getting support with a Cambridge-based Wefunder petition online, which has generated nearly 1 million pledges and counting. That’s a good place to start, but we also encourage you to contact our senators to voice your support directly through a personal letter or a phone call.