Letter to House Financial Services Committee Chairwoman and Ranking Member: Need Still Exists to Focus on Capital Access and Capital Formation Legislation

By at 2 April, 2019, 8:02 am

The Honorable Maxine Waters


Committee on Financial Services

U.S. House of Representatives

Washington, D.C.  20515


The Honorable Patrick McHenry

Ranking Member

Committee on Financial Services

U.S. House of Representatives

Washington, D.C.  20515


Dear Chairwoman Waters and Ranking Member McHenry:

Access to capital and strengthening U.S. capital markets remain priority issues for the Small Business & Entrepreneurship Council (SBE Council). Like many other organizations and associations, we began 2019 with high hopes that the 116th Congress would address this top concern for small businesses and entrepreneurs. Action on the issue could have been done rather quickly by revisiting the massively bipartisan “JOBS and Investor Confidence Act of 2018” (JOBS Act 3.0), which passed the U.S. House last year, or by advancing measures in that package on an individual basis. Doing this early in 2019 would improve chances for action and advancement in the U.S. Senate on JOBS Act 3.0 bills.

Ensuring abundant capital for growth-oriented firms and new startups is still very important to the U.S. economy. Yes, the economy is growing, but promising firms still need capital to scale and take advantage of growth opportunities, and the trends in higher startup activity and new business creation require improved access to capital to ensure that would-be entrepreneurs move from the aspirational stage to action.

As noted within the 2019 Economic Report of the President released by the Council of Economic Advisor (CEA) on March 19, the sizable increase in Employer Identification Number (EIN) applications is a very positive sign for the economy. As you know, and as SBE Council has testified on numerous times before the committee over the past five years, entrepreneurship has remained weak for an extended period of time, with startups among millennials especially weak. But there is good news in the latest data.

The CEA points to a very high jump in the number of people applying for an EIN number. In the last quarter of 2018, 877,102 individuals applied for an EIN. For every quarter of 2018, the number of EIN applications exceeded 850,000. The year prior also saw solid increases (in the high 700,000 range and ending above 800,000.) From 2012 to 2016, EIN applications were in the low, middle and high 600,000 range. The solid increase in “high-propensity” business applications (firms with a payroll) is also a very positive trend, as noted by the CEA in their report.

The increase in the number of people taking that first step toward starting a business, does not mean they will actually open one. As you are well aware, the conditions have to be favorable for this risk-taking activity, and access to capital is a key piece of that favorable environment.

The desire to help small businesses and startups spurred bipartisan action in the Financial Services Committee in last Congress. Increased business creation is so very critical to economic dynamism, and remains a solid path to financial independence and wealth creation. The capital formation piece is critical to all of this, and the reforms embedded in JOBS Act 3.0 would have helped diverse sets of entrepreneurs and individuals start or grow businesses.

SBE Council is concerned about the lack of action on capital formation measures. Instead, we see actions that have the potential to restrict access to capital and harm the environment for investment. More rules and red tape will harm the capital markets. Not doing anything to improve U.S. capital markets only hurts our competitiveness, and especially the entrepreneurs and small businesses that require capital to start or grow their businesses.

SBE Council stands ready to help the committee and all members develop a consensus around capital access and capital formation issues. We believe JOBS Act 3.0 is a sound template and starting point that will produce meaningful results for entrepreneurs and small businesses.

Thank you for your time and consideration, and I look forward to further discussions with you and your teams.


Karen Kerrigan, President & CEO


cc:   The Honorable Carolyn B. Maloney, Chair

The Honorable Bill Huizenga, Ranking Member

Subcommittee on Investor Protection, Entrepreneurship and Capital Markets

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