SEC Commissioner Calls For Improved Access To Capital For Underrepresented Entrepreneurs
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Reviewed by Kristina Knight, Journalist , BA
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The Securities and Exchange Commission (SEC) Commissioner recently addressed the new members of the Committee, emphasizing the importance of advising the Commission on small business capital formation. The Commissioner highlighted the need to remedy funding gaps for underrepresented entrepreneurs, a priority that requires increased and sustained attention.
Annual Report Findings, Challenges in Accessing Capital, and Navigating Securities Laws
According to the latest Annual Report by the Small Business Advocate, 78% of entrepreneurs report that access to capital is limiting their day-to-day operations, and 89% say that barriers to accessing capital limit their business growth potential. Furthermore, 73% of owners are looking for support in preparing to apply for and use business financing, while 40% of entrepreneurs find it challenging to find a lead investor when raising capital for early-stage startups.
The Commissioner acknowledged that many small businesses, particularly those from underrepresented founders, struggle with navigating securities laws and the exempt offering framework. This often favors well-resourced market participants, leaving only 6% of small businesses seeking external financing through equity investments.
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Innovative Solutions, Educational Resources, and Committee’s Role in Maximizing Access to Capital
Drawing from personal experience growing up in an immigrant household with entrepreneurial parents, the Commissioner expressed optimism in the power of innovative thinking and creative solutions to address these challenges. The insights provided by the Committee can help develop new solutions for the 94% of small businesses in need of access to growth capital but have not sought equity investments.
The Commissioner also mentioned the Small Business Advocate’s recent development of an online educational resource called “Building Blocks,” which helps explain the process of capital raising in the markets. This resource has the potential to narrow the knowledge gap between well-resourced and underrepresented entrepreneurs. The Commissioner has recommended modest steps to improve the visibility and reach of this type of Commission resource.
The Committee’s work is expected to result in direct recommendations to the Commission on maximizing access to capital for disadvantaged entrepreneurs more generally. The Commissioner emphasized that the fulfillment of the capital formation mission depends on broad-based access to growth capital for the nation’s smallest, most underserved businesses.
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SEC.gov | Remarks at the Small Business Advisory Committee Meeting. www.sec.gov. Accessed June 15, 2023. https://www.sec.gov/news/speech/lizarraga-remarks-sbcfac-061423
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SEC.gov | SEC Small Business Advocacy Office Releases Annual Report on Capital Raising. www.sec.gov. Published December 16, 2022. Accessed June 15, 2023. https://www.sec.gov/news/press-release/2022-229