Equity for small businesses has rarely been dealt with. Recent changes in federal and state securities laws and regulations are making it easier for small companies to raise equity funding. Direct public stock offerings now are allowed. The marketing of stocks over the Internet may bring a new dimension to the acquisition of equity capital by small and emerging businesses. Equity also is a key element for enabling small businesses to obtain credit financing.
Conventional loans require collateral.
Business owners must have their own or someone else's money invested in the business or have other assets that can be put up as collateral. Typically, the Small Business Administration requires borrowers to have invested a minimum of 30 percent of the loan amount in the business. This issue was approved by the voters on November 4, 1997. A Constitutional Amendment will be needed to allow these loans. Legislation is needed to clarify the way these loans are made.