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Statement of the Honorable Yvette Clark

Ranking Member

House Committee on Small Business

Subcommittee on Investigations, Oversight and Regulations

Financing America's Small Businesses: Innovative Ideas for Raising Capital

June 6, 2013

Thank you Mr. Chairman and I’d like to welcome and thank our witnesses for their testimony this morning.

For the past two years, our nation’s economy has experience positive and steady private job growth; adding 4.8 million jobs during that time. However, these gains have not been enough to overcome our nation’s above-average unemployment which currently stands at 7.5%; minority unemployment for African-Americans and Latinos, while retreating, remains at 13.2% and 9% respectively.  So while we are moving in a positive direction, we still face challenges in fully putting America back to work.

Creating nearly two-thirds of all new jobs, our small businesses must remain front and center to our recovery.  For our national economy to experience a more robust recovery, our entrepreneurs and small businesses must play their traditional job-creating role, and for that they must have access to capital. Four years after the financial crisis effectively froze the credit markets, entrepreneurs and small businesses are still facing challenges acquiring funding through traditional avenues.

Increasingly, entrepreneurs are turning to crowdfunding and other innovative funding methods to finance their ventures.  These include using the internet to reach accredited investors, creating peer-to-peer lending platforms, and applying old lending models in new ways to address this issue. Congress passed the Jumpstart Our Business Startups, or JOBS Act of 2012 to overhaul SEC restrictions on crowdfunding and small public stock offerings.  Once the SEC publishes final rules, this law has the potential to unlock an untapped network of millions of investors to small businesses and entrepreneurs seeking capital. 

The SEC has faced challenges in the past balancing capital-raising needs of small companies with the need to protect investors with limited wealth and financial market knowledge.  They are now in the difficult position of creating the framework for a new financing regime that has the potential to be easily exploited without proper oversight and regulation.It is important that the SEC work quickly, though not hastily, to finalize crowdfunding rules.  Rushing to publish rules could over-expose investors, or lead to an unworkable system that shuns market participants. 

In today’s hearing, we will discuss the new and innovative ways small businesses are raising capital and how implementation of the JOBS Act will effect lending to, and investment in, our job creators.  While the outcome remains uncertain, we must remember that it is vitally important the SEC strike the appropriate balance between investor protection and producing a functional system that provides the capital for small businesses. 

Again, I’d like to thank our witnesses for the insights today and I yield back. 

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