March 2, 2015
When Congress enacted the Jumpstart Our Small Business Startups (JOBS) Act of 2012, there was much enthusiasm about the potential to unlock capital for startups and existing small businesses. What has followed is a regulatory standstill. The Securities and Exchange Commission was supposed to finalize crowdfunding rules by the end of 2012. As of March 2015 the rules still have not been finalized.
In response to the inactivity at the national level, a number of states, including Michigan, have enacted intrastate investment crowdfunding legislation that allows entrepreneurs to seek funding from investors within their own state. Michigan’s legislation, introduced by State Representative Nancy Jenkins (R-Adrian) is known as the Michigan Invests Locally Exemption (MILE).
MILE allows Michigan businesses to seek investment from non-accredited Michigan investors. Traditionally, small businesses seeking investment were limited to accredited investors – people who make more than $200,000.00 per year ($300,000.00 for a married couple) or whose net worth, excluding their primary residence, exceeds $1,000,000.00. These rules severely limited the pool of potential investors. MILE drastically increases that pool of potential investors within Michigan.
Using MILE, a Michigan business can raise up to $1,000,000.00 from non-accredited Michigan investors without having to obtain audited financial statements. If the business has audited financial statements, that amount increases to $2,000,000.00.
While there are regulatory requirements and oversight, MILE’s requirements are far easier to navigate than the traditional rules that apply to small investment offerings. MILE puts Michigan at the forefront of the investment crowdfunding movement and gives entrepreneurs and business owners an excellent new option for seeking investment.