My Turn: Bureaucrats hinder business
Small businesses are the engines of a free economy. Governor Murkowski promised Alaskans a positive approach to small business. In the Reagan Administration, I served on the Small Business Administration's National Advisory Council. I learned that small businesses could expand quickly, capitalizing on opportunities. Expanding Alaska small businesses, with innovative methods, can be powerful engines to a healthy economy.
Entrepreneurial small businesses have great opportunities in Alaska. But entrepreneurs must raise investment capital to grow the companies that grow our economy. Be careful in capitalizing that new business. Beware of the "investigators" of the Division of Banking, Securities and Investments.
I'm a real estate broker. I've seen too many agents starve to death before closing. The fail rate in real estate is high. I learned about commission factoring, a process where commissions are sold at a discount for immediate cash. Factoring is hundreds of years old. Banks don't do it since it's higher-risk than certificates of deposit. Most outside companies don't buy from Alaska agents or charge too much. Local factoring therefore should work.
After filing a Regulation D exemption with the Securities and Exchange Commission and a comparable form accepted by the Alaska Division of Securities, Commission Advance LLC was born. As a new small business in Alaska, CA offered accredited investors 20 percent APR secured notes. Here's how it works. Investors put up money. Commissions are purchased. Commissions are paid. Repeat. Pretty simple, except to an "investigator" for Securities. Our offering circular produced endless questions from the "investigators." And while the investigation drags on, they demand we raise no further capital. No complaint. No one damaged. Just a curious bureaucrat. Not a good thing for a new small business.
Commission Advance was patterned after a local company that raises capital by advertising in the Anchorage Daily News, securing high-interest-rate investors and investing those proceeds in discounted mortgages. Sound familiar? After we advertised, two "investigators" visited, secretly posing as investors. Then like Batman and Robin, they revealed their true identity. Actually, we welcomed their advice. They made suggestions on "confusing points." We answered and accepted all suggestions - making the language changes almost instantly. That was two months ago. The "investigation" continues.
We can all agree that full and proper disclosure of pertinent facts is required. But, this "investigator" accused us of discounting investors 24 percent. Ridiculous. No investor would invest. He insisted our start-up costs would come from the investors. No, they came from me. He insisted that a portion of the fund was an investor-to-investor fund (whatever that is). He described alternative wording as "inherently misleading" - until he learned that his fellow "investigator" suggested that wording. Remember the movie, the Pink Panther? This guy makes Inspector Clouseau look like a genius.
We explained. Investor funds are held in a local bank trust account or invested in commissions. But, he can't figure it out. He got mad that our first investor wanted to renew his successful $50,000 investment for another 90 days at 20 percent. Since his investment performed perfectly, just as disclosed, I wasn't surprised. But the "investigator" threatens further investigation. Oh my!
A hostile "investigator" who knows nothing of small business wants to protect accredited Alaska investors from great yields. Huh? Which Alaska law allows a bureaucrat the power to kill a business at will? Our clients wait for help and our potential investors cool their heals. Alaska small businesses and the public should watch this drama closely since this anti-business bias could kill their small businesses before they get going.
Alaska's real economy (the private sector) could get stronger when the Murkowski administration understands and assists Alaska-based small businesses in raising capital, finding products and markets. Expanding small businesses hire Alaskans and create opportunities throughout the state. A business-friendly approach in this administration? "Investigator Clouseau," currently of Juneau, didn't get the message.
• Jim Crawford is a former Chairman of the Republican Party of Alaska.