DIXON – A bill making its way through the Illinois General Assembly could make it easier for small businesses or startups to raise capital.
The bill, introduced by state Rep. Tom Demmer, R-Dixon, amends the Illinois Securities Law of 1953 to allow for smaller investments in companies that can’t afford a full public offering.
Similar to using a Kickstarter campaign, business owners can solicit money from individuals for smaller amounts. But unlike a Kickstarter drive, which usually solicits donations or a pre-sale of the product, the bill would allow a percentage of the company to be sold.
“Crowdfunding will be the way of the future and is the next step in evolution for startups and small businesses,” Demmer said in a statement. “There are a lot of entrepreneurs out there who have great ideas to start a business, but have no capital.”
“This bill will give those people the opportunity to bring new and innovative business ideas to Illinois,” Demmer said.
In an interview Friday, Demmer said buying a percentage of the company could entice investors to give more than the $50 they might donate to a Kickstarter campaign.
The Midway Drive-In, which tried for years to make the switch to a digital projector, unsuccessfully tried a Kickstarter campaign.
Demmer said this bill could create more viable options for the drive-in, going beyond asking for donations and instead seeking investors.
There will be caps for how much can be invested or raised to protect against scams, Demmer said, adding that those caps are still being negotiated but will likely be “relatively modest” – a few thousand dollars.
Demmer filed the bill Tuesday and was referred to a committee the next day. On Thursday, state Rep. David McSweeney, R-Cary, was added as a co-sponsor.
Similar legislation has been passed in Michigan, Wisconsin and Indiana. Crowdfunding legislation has been introduced in several other states as well.
Illinois is allowed to regulate intrastate business only. As a result, Demmer’s bill allows for Illinois-based small business or startups to raise money from Illinois residents through Illinois banks.
The capital would be raised on certified websites, similar in concept to Kickstarter.
Demmer said similar federal legislation has stalled, leaving states on their own.