Congress Passes the Small Business Investment Expansion Act to Help Close the Tax Gap

Congresswoman Debbie Wasserman Schultz made history as the youngest woman ever elected to the Florida state legislature at the age of only 26. She has dedicated over fourteen years to working on behalf of the people of Southern Florida. From Florida's 20th Congressional District, she made a name for herself as a fighter for South Florida families by authorizing the passing of numerous family care bills such as the “Drive Thru Baby Bill” and the “Drive Thru Mastectomy Bill”.

Her dedication to the people of Florida is well recognized by her colleagues in the Florida Legislature where she has held several influential leadership positions. She is well-known as someone who works hard on behalf of children, education, health care, Social Security, Medicare and the security of every American.

The recent credit crunch resulting from problems with sub-prime lending has scuttled several recent high profile large business deals nationwide. Likewise, many small businesses and entrepreneurs seeking to launch a small business around a new product or new business concept have found it increasingly difficult to receive the start-up capital necessary to launch their enterprise. Unfortunately, the Small Business Association (SBA) is unable to help many of these entrepreneurs because current investment programs are ineffective or unknown to entrepreneurs seeking to start a business. It was with this in mind that Congress recently passed H.R. 3567, the Small Business Investment Expansion Act Of 2007.

This legislation seeks to address the current $60 billion in unmet capital needs of small business by helping to ensure that small business entrepreneurs are able to secure the funding that they require to start their company.

The Small Business Investment Expansion Act of 2007 addresses current shortfalls, by overhauling the SBA’s Small Business Investment Company (SBIC) and the New Markets Venture Capital (NMVC) programs which are designed to aid small businesses. The legislation places special emphasis on small businesses owned by women, minorities, and residents of low income areas because these owners generally have the most difficult time receiving investment capital.

The bill creates a new Angel Investment Program to help fill the seed capital gap that was created by the elimination of the participating securities program, one of SBA’s venture capital initiatives. The objective of this new program is to infuse entrepreneurs with this source of individual investor financing. Angel investors alone are estimated to account for 51,000 start-ups each year so improving access to these individual investors should greatly improve access to capital for entrepreneurs. Specifically, the bill builds the first-ever nationwide network of angel groups and partners the SBA with these licensed investor groups, providing them with matching financing leverage. This new program provides greater taxpayer protection than the SBA’s current programs. These programs would work to fill the gaps left by Bush Administration reductions in the SBA’s venture capital initiatives.

The legislation also emphasizes investment in low income areas and to minority and veteran owned businesses – three sectors that have historically faced obstacles in accessing investment capital. Additionally, the Small Business Act will be amended to ensure that firms that receive venture capital are able to maintain their small business classification, removing current disincentives to seeking this kind of financing. Finally, improvements will be made to the surety bond program by raising the maximum allowable bond amount and decreasing fees for borrowers and surety companies, making the initiative more accessible.

By passing the Small Business Investment Expansion Act of 2007, Congress hopes to open new windows to funding small businesses while ensuring that small businesses that receive venture capital are not treated any differently than those entrepreneurs receiving traditional financing. The bill includes safeguards that prevent any individual or entity from gaining an unfair advantage, ensures that the investors themselves are small, and prohibits any large companies from being involved.

Small businesses represent 99.7% of all employer firms in America and employ half of all U.S. workers. It is vital that access to capital be available to fund this driving force in our economy.