Dothan resident Precious Freeman left the chamber of commerce Wednesday afternoon more knowledgeable about how to take advantage of Alabama’s new crowdfunding law.
The Dothan Area Chamber of Commerce welcomed the bill’s creator, Sen. Arthur Orr of Decatur, and Alabama Securities Commission attorney Ed Reed to host a seminar for those interested in learning about the new way Alabamians can raise money from Alabamians to start a small business.
Freeman said she’s always looking to learn new information and what she learned Wednesday she plans to use down the line for a project she has in mind.
“I thought it was pretty thorough,” she said of the seminar.
Freeman said she also appreciated that the senator and the ACS attorney who would be handling the applications took the time to come to Dothan and explain the process.
“We planned that when the bill passed that we would try to go around the state and hold public forums for people to get their questions answered by a securities commission lawyer,” Orr said.
The bill, which was signed in April, allows Alabama residents to use social media and advertising to raise up to $1 million from small investors who live within the state.
The bill is different than other Internet crowdfunding sites such as Kickstarter or Indiegogo, in that this bill allows a person to sell equity or shares in the business.
Orr said this form of crowdfunding differs in that a person isn’t donating or buying an incentive for supporting a project. The investors are actually investing in hopes of a return.
In order to do that, the person seeking investors must register with the state and apply for an exemption.
In today’s financial market, Orr said it’s become difficult for small start-ups and small businesses looking to expand to raise the capital they need and the bill is intended to be a low cost, simple solution.
“We wanted it simple and easy to use. We didn’t want a 50-page bill with a lot of hoop jumping and we wanted it to be low cost for the small business in that we didn’t have to require a broker/dealer or go through a middle man,” Orr said. “The ability for small businesses to be able to raise capital was the primary motivating factor for putting the bill together.”
Alabama is one of the first states to pass a bill of this nature, along with Kansas and Georgia.
After the bill passed, Orr said he was surprised to get phone calls from the Wall Street Journal and other national publications interested in the law and how Alabama has taken a leading role in the crowdfunding movement. About a dozen other states have passed similar laws.