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Economic Outlook Mixed for Small Companies Because of Regulation Overkill: American Capital Partners

(Aprl 02, 2008)-- “The economic outlook for small emerging companies will be mixed during the first half of ’08 because of burdensome regulatory accounting and legal costs making it almost impossible for many of these smaller firms to access the U.S. capital markets and survive,” says Frank Speight, CEO of West Palm Beach, Florida-based American Capital Partners and Chairman of the National Small Public Company Leadership Council and the Microcap Company Political Alliance Corporation, a small business advocacy group. “Small companies will take on varying shades of economic performance, from vibrant to dark, depending on whether or not these entrepreneurs can find the necessary money to employ people and pay for their business growth which, in turn, impacts our economy,” according to Speight. American Capital is a business development firm that provides small entrepreneurial companies with their funding needs.

“It all comes down to whether or not America’s small emerging firms have access to needed capital if they’re going to survive or not,” said Speight. “My industry continues to suffer under unfair and unreasonable regulatory costs. Congress needs to continue to review and reform any current regulations such as the Sarbanes-Oxley law that unfairly restricts smaller public companies from accessing the capital markets. The Sarbanes-Oxley law, in particular, has truly hurt my industry over the past few years,” Speight added. “We need to find a balance between protecting investors, which we are in favor of most enthusiastically, and providing emerging small businesses with the necessary money to grow and thrive and create jobs in this economy.”

Speight pointed out that the current economic slowdown will drive more and more American entrepreneurs overseas to Europe and Asia in order to find the necessary capital to survive. “Over the past three years, I’ve seen a literal flight of small companies to Europe and Germany, in particular,” he said. “The German Frankfurt Exchange is less expensive, has more reasonable regulations and is generally more accommodative to U.S. entrepreneurs seeking money than the U.S. market. As a result of unfair and burdensome U.S. regulations and accounting and legal costs imposed on my industry, some of the best American entrepreneurial creative leaders are now fleeing to Germany for financial support. What does this say about America and its treatment of emerging smaller companies?”

“The so-called ‘access to capital’ challenges ahead for small companies are enormous,” said Speight. “Most of these companies are new or ‘start-up’ firms – the next generation of Microsoft or Home Depot – and lack the access to credit at banks which typically look for three years of profitability, assets, etc. So these tiny companies must raise capital through avenues such as “angel” investors, venture capital funds and the capital markets. Today, most of these approaches are restrictive and costly. Investors are leery to invest in these companies due to the restrictions placed on the stock and the need to hold those shares for up to two years,” he added.

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