The Securities and Exchange Commission is studying ways to make Regulation A more useful to growing companies. Regulation A is a seldom-used part of securities law that allows companies to sell small amounts of stock directly to the public. One possible change would allow businesspeople to test-market ideas requiring capital. Company owners, after filling out a simple SEC form, could then advertise to gauge potential investor interest before committing to an expensive stock offering. Chip Morse, a participant in the SEC discussions, says such a change would particularly benefit companies with few contacts in the financial world -- "the normal, nonsexy, non-high-tech, non-explosive-growth companies. . . . It's a very, very significant departure from the regulatory framework."
Look for accountants to get more conservative as the number of lawsuits against them rises. According to Walter Primoff of the New York State Society of CPAs, accountants are becoming much more careful in their selection of new clients, especially start-ups, and more cautious with existing customers. The trend is likely to continue in the wake of lawsuits stemming from the savings-and-loan crisis.
As ordinary credit tightens, interest in Small Business Administration loans goes up. In the past six months Philip Scarborough, an SBA loan packager in Atlanta, has had an increase in referrals from banks whose new lending rules no longer fit their small-business customers. And Anthony Feraro of ITT Small Business Finance Corp., which operates in 36 states, attributes about half of his company's recent 35% growth in SBA applications to tighter credit elsewhere. Notes Steven Stultz, a loan packager in Newport Beach, Calif.: "There are a lot of people [applying] who wouldn't have been looking at the SBA product a year ago."
A small-company export-assistance program has been named one of the 10 most successful government innovations of the year. Chosen by the Ford Foundation and Harvard's Kennedy School of Government from among 1,552 entrants, XPORT is an export-trading company and is operated by the Port Authority of New York and New Jersey. It won kudos for establishing long-term relationships with selected small to midsize companies and walking them through all aspects of the export process. XPORT managers hope to use some of the award money to encourage other states to replicate the program.
-- Martha E. Mangelsdorf
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