Summary: Here's why community capital and Regulation A can be important
"RegA" refers to Regulation A, which is a regulation established by the U.S. Securities and Exchange Commission (SEC). Regulation A is a framework that provides an exemption from certain registration requirements for small public offerings of securities, which in turn allows companies to more easily raise the money they need to fund their mission. Why does this matter? RegA allows community capital to thrive - it can make more financial resources available within a community as companies can use it to create investment opportunities that support local businesses and economies.
Here's why community capital and Regulation A can be important:
Access to Capital for Small Businesses: Regulation A can be beneficial for small and local businesses that may have difficulty accessing traditional financing methods. It allows them to raise capital from a broader range of investors, including members of their own community.
Local Economic Growth: When businesses in a community can access capital more easily, they can grow and create jobs locally. This can lead to increased economic activity and prosperity within the community.
Community Investment: Regulation A encourages local residents and investors to support businesses and initiatives in their community. This promotes a sense of ownership and investment in the success of local economies.
Diversification of Investment Portfolios: For investors, Regulation A offerings can provide opportunities to diversify their portfolios by making investments not tied to the volatility of the public markets (Wall Street). This can potentially reduce risk and support local economic resilience.
Innovation and Entrepreneurship: Easier access to capital can foster innovation and entrepreneurship within a community. This can lead to the development of new products, services, and industries, driving long-term economic growth.
Community Development: Investments made through Regulation A offerings can be used for various community development purposes, such as infrastructure improvements, affordable housing projects, or initiatives that benefit the local population.
Reduced Reliance on Traditional Banks: Regulation A can reduce the reliance of small businesses on traditional banks, offering an alternative source of capital that may be more accessible and flexible.
Reduced Costs: While RegA securities offerings still undergo a thorough review by the SEC (and the issuing companies have an annual independent financial audit as well), there are far less costs for a RegA offering, than for a “traditional" (registered) public offering.
We at Worthy are big advocates of this tool for community capital! (Worthy bonds uses this framework for its securities). Read more about RegA and other financial literacy HERE.