BOISE, ID – Four U.S. Senators, including Idaho’s Mike Crapo, want to make it easier for companies to go public. The bipartisan group has sponsored a plan that allows small-and medium-sized firms to raise money by selling shares. There’s already a little-known Idaho program that works like a mini-initial public offering for small businesses.
U.S. Senator Mike Crapo says a business typically expands and hires workers when it gets listed on the stock market. That’s why he and other lawmakers in Washington, D.C. want to slash the red tape that keeps companies from going public.
U.S. Senator Mike Crapo: “We are simply creating a much more accessible process through which our small businesses in the United States can access capital.”
The bill would cover companies with less than $1 billion in annual revenues. In Idaho, a program already exists for companies with hardly any revenues to sell shares to the general public. It’s called SCOR, which stands for Small Company Offering Registration. The Idaho Department of Finance oversees the program. The Department’s Senior Securities Analyst Patty Highley has worked on SCOR since it began in 1990.
Patty Highley: “It’s as simplified as you can possibly make a public offering.”
In a typical offering, it takes millions of dollars and a small army of lawyers and accountants to file paperwork with the Securities and Exchange Commission. SCOR is much easier. Highley says successful applicants can raise up to one million dollars from non-accredited investors with a lot less paperwork.
Becky Logue, a local entrepreneur, went through the SCOR process. She’s President and Founder of Dental R.A.T. Logue’s technology is a computer “mouse” that’s foot driven for use in dental offices. She got the idea through her work as a hygienist. Logue didn’t want to use her hands to enter data while checking a patient’s teeth and gums. She also didn’t want to hire another person just to do that.
Becky Logue: “I watched my kids play on those little PlayStation games with their foot and I’m thinking you know if I can just run my computer with my foot I wouldn’t need that second person in here.”
Logue raised half a million dollars through SCOR. Her company now has about 80 shareholders. Few Idaho companies, though, have used SCOR to raise money. Patty Highley says only about seventy companies have applied during the past twenty years. One reason is the amount of time it takes to get investors.
Patty Highley: “When an entrepreneur comes to the table with this offering, and they’re trying to run the business, and they’re trying to sell their product, and then they’re trying to sell the securities offering, it can become overwhelming.”
Highley adds some entrepreneurs are intimidated by the form U-7 that’s required of SCOR applicants. It’s a 37-page questionnaire that asks for detailed company and financial information. But she says, when the U-7 is finished, it’s a solid company prospectus that businesses find useful.
Patty Highley: “I know quite a few people in the venture capital world and in the small business world, and everybody says, ‘Gosh, we just don’t see good business plans.’ So the SCOR is a great first step in saying, ‘Is this a viable idea?’”
John Glerum directs Boise State University’s Technology and Entrepreneurial Center. He’s seen a lot of business plans throughout his career as a CEO and entrepreneur. Glerum introduced Logue to SCOR to raise capital. He says SCOR can help keep small business owners from cutting corners.
John Glerum: “It’s kind of like cheating at solitaire meaning that ‘oh it won’t really matter if I do this.’ Well, when you have stock owners, share holders, it gives you more accountability and generally that’s a good thing.”
Logue’s SCOR offering allowed her to quit her job and run Dental R.A.T. full time. She now hopes to enter other markets where foot operated devices make sense like the medical and computer gaming sectors. Her eighty stockholders will share in her company’s profits as the business grows.
Copyright 2011 Boise State Public Radio