The SEC Office of the Advocate for Small Business Capital Formation 2022 Annual Report

The U.S. Securities and Exchange Commission's (SEC) Office of the Advocate for Small Business Capital Formation (OASBCF) assists small businesses in accessing the public capital markets. Their goal is to advocate for solutions to address challenges faced by small businesses and their investors raising and deploying capital to make financing a reality for small businesses.

The OASBCF's 2022 Annual Report represents its efforts in increasing access to capital amongst small businesses, outlining the crucial legislation, regulations, and activities of the OASBCF during the 2022 fiscal year.

The report also outlines research and recommendations on how small businesses can access capital and better understand investment opportunities and risks moving forward.

One legislation that can help small businesses raise funding is Rule 506(b) — an exemption from registering securities with the SEC by raising capital from accredited investors. If you’re a small business, VerifyInvestor.com can help support the fundraising process by efficiently verifying accredited investors through an accredited investor verification form.

Let’s take a deeper look at the 2022 Annual Report from the OASBCF to learn more about the present challenges small businesses face and how to overcome them.

Overview of the 2022 Annual Report

The 2022 Annual Report paints a picture of the SEC Office of the Advocate for Small Business Capital Formation’s achievements, successes, and lessons learned throughout the year. The report includes highlights of the Office’s advocacy work in the fiscal year 2022, policy recommendations, a summary of the Small Business Capital Formation Advisory Committee’s 2022 activities, and data on small business capital formation.

One of the most significant challenges for small businesses outlined in the report is access to capital. 75 percent of business owners report challenges obtaining capital. 89 percent report that difficulty obtaining capital hinders their growth potential, and 78 percent report it hinders day-to-day operations.

To circumvent this challenge, the office recommended that entrepreneurs and their investors need more accessible tools and educational resources to navigate complex securities laws. One of these resources provided by the office is the Capital Raising Hub, a platform they hope to continue to grow to supply the necessary resources to entrepreneurs and small businesses, particularly those who are underserved.

Additionally, most small businesses seek funding from venture capitalists, but only 1 in 1000 receive VC funding, and VC funding is especially difficult for minority entrepreneurs. To rectify this problem, the office proposes making alternative funding opportunities more attractive and available by expanding the accredited investor definition and considering the impact of any change to the income and net worth thresholds would have on minorities and populations located in rural areas.

Finally, the office states the importance of connecting founders with savvy investors, focusing on ways to foster a robust IPO pipeline despite current macroeconomic headwinds, and addressing the challenges of staying public to help small public companies stay public.

This Annual Report, which you can read in full here, provides a foundation for empowering small businesses with the resources and advice they need to successfully obtain and utilize the capital necessary to grow and compete. It reveals important information for both small businesses and legislators. The hope is that, with this information, the U.S. can move closer to a more equitable and transparent capital market that puts the needs of small businesses first.