Tucked into President Obama's jobs speech yesterday was a plan that could make it easier for small companies to raise money from individuals, more commonly referred to as “crowdfunding.” “We're also planning to cut away the red tape that prevents too many rapidly growing start-up companies from raising capital and going public,” the President said.

A fact sheet released by the White House Press Office confirmed the President's support to establish a crowdfunding exemption from Securities and Exchange Commission registration requirements.

“The administration also supports establishing a “crowdfunding” exemption from SEC registration requirements for firms raising less than $1 million (with individual investments limited to $10,000 or 10 percent of investors' annual income) and raising the cap on “mini-offerings” (Regulation A) from $5 million to $50 million,” the White House said in the fact sheet.

Under current SEC regulations, small businesses with assets of more than $10 million at fiscal year end and who wish to raise capital from more than 500 individuals must register with the SEC. The rule is known as the 500 Holder Rule.

Small start-ups who wish to raise funds through individuals from popular seed money Websites such as ProFounder.com and GrowVC.com will inevitably need to register with the SEC as they will most likely attract over 500 individual investors. Many successful technology-based companies, such as social networking giant, Facebook.com, and founders of the Web-based payment processor PayPal, relied on crowdfunding to build their businesses.

Also mentioned in the fact sheet are upcoming efforts by the administrator to work with the SEC and explore ways to address the costs that small and new firms face in complying with Sarbanes-Oxley disclosure and auditing requirements.