This post was originally published on CommunityGreenEnergy.com. Community Green Energy is currently developing Solar Co-Ops or Solar Gardens for Government and Municipal Energy Aggregation programs in IL and NJ along with the launch of Virtual Solar PPA program to match electric users with utility scale solar for the sale of the electric commodity to get the project funded. Community Green Energy is partnering with Alternative Utility Services, Inc. on the MEA program.

The capital crunch has crushed start-ups, small businesses and even real estate. Banks will loan you money based on what assets they could liquidate in a pinch. If you are dreaming of attracting venture capital, you should know that in 2012 venture capitalists funded 3,800 companies out of the 27.5 million companies that exist in this country.

There seems to be a big disconnect in how our capital flows only to large projects and companies while the job creators and local economies remain starved for growth capital. Per the April 2013 ADP Employment Report, 67% of employment growth was associated with small businesses having 1-19 employees.

The amount of capital in the US is not the problem; our problem is the allocation of capital. The business of raising capital has been controlled by the venture capital/investment bankers and the SEC governing the rules for raising capital. The government created laws over 80 years ago to protect investors from being sold a bunch of “blue sky” with no real company behind the investment. In fact, the current rules only allow Accredited Investors (about 7% of the population) with the ability to invest directly into non-public companies. This also means if you are trying to raise money from investors, you need to have a list of Accredited Investors that you actually have a relationship with prior to asking them if they will invest. You can’t advertise your investment opportunity unless you file to become a public company.

The investment bankers became the people that could control the money flow because the government regulations allowed a limited number of people that could meet the requirements. When the rules and industry started, there was one common denominator 80 years ago–a lack of access to information. Everything was hard copy–not even fax capability. The government figured that only the big investment banks had the wherewithal to determine what constituted a worthwhile investment. Actually the government and investment bankers have not done a great job at it when you consider the mortgage crisis, Bernie Maddoff, Enron etc. But even in these cases, lack of accurate and timely information allowed things to happen behind closed doors.

The worldwide web and social media has changed the information dynamics. You can now access documents any time of day and get feedback from millions of people on a company or product. You have the ability to immediately learn about opportunities locally and/or across the country to invest in. There is no longer any stranglehold on information. However, the 80 year-old laws that were created before the internet existed are still in control.

In 2012, The Jumpstart Our Business Startups Act or JOBS Act was signed into law by President Obama. First, the law permits companies to advertise their private placement offerings; which means, you no longer had to have a pre-existing relationship with the person. This greatly expands the market for companies looking to raise money and investors looking to invest in companies. While this point is significant, the JOBS Act also permits companies to raise up to $1,000,000 per year using the internet to reach individuals. This provision created the new industry for equity crowdfunding.

Crowdfunding donations and product presale generated over $2.7 billion last year. The power of the crowds could be the game changer for local and small business to attract the capital needed to grow.

But wait! You can’t run out and start advertising for investors just yet because the SEC will not have the final rules to administer the new law until probably sometime in late 2013 or 2014.

This article will not go into details of the JOBS Act because the information is available at your fingertips- just Google it. We don’t know what the rules will say, but we do know that crowdfunding for equity will soon become legal.

The one constant we can count on is change and in the case of raising capital for small businesses, the change is welcomed. If you have ever wondered, as a small business how you can monetize all of those online connections, fans and likes, crowdfunding could be the answer. Replicable and scalable!