Crowdfunding bill could be boon to small Arizona businesses

PHOENIX — Small businesses in Arizona could turn to crowdfunding if a bipartisan bill makes its way through the state’s legislature.

SB 1450 and its House counterpart, HB 2591, would allow small businesses in Arizona to sell equity, or securities, in its company in exchange for funding, something that is only possible on a federal level.

“It’s illegal to offer securities (in Arizona) without going through the Securities and Exchange Commission,” said Rick Murray, CEO of the Arizona Small Business Association.

Businesses are allowed to use crowdfunding websites such as Kickstarter or GoFundMe on a donation or reward basis. Typically, businesses offer discounts or products in exchange for the public’s help.

Murray said if the bills were to pass and be signed by Gov. Doug Ducey, small businesses could raise up to $2.5 million in funding through investors.

Murray said this could allow many small businesses to still get funding even after being declined for bank loans.

If passed, Arizona would join 15 other states that have enacted similar crowdfunded investment legislations.

Arizona Sen. David Farnsworth supported the legislation and said it could also help businesses avoid going into debt. It could also help encourage more people to invest in local companies, he said.

“This give people who would ordinarily not be investing the opportunity to invest in something they believe in; something that’s close to home,” Farnsworth said.

The Arizona Corporation Commission would oversee the system of selling securities in Arizona and would also have the authority to make sure companies are following through on promises to investors, State Rep. Jeff Weninger said.

The law would only allow investment in Arizona companies by Arizona residents, according to State Sen. Steve Farley.

The provision would help ensure investments are being made locally and that money is staying in Arizona, he said.