House Passes INVEST Act, Aiming to Expand Capital Access for SMBs and Investors

WASHINGTON — The U.S. House of Representatives passed the Incentivizing New Ventures and Economic Strength Through Capital Formation (INVEST) Act in early December 2025, a sweeping legislative package designed to overhaul capital formation rules for small businesses and expand investment opportunities for retail investors. The bill, which passed with bipartisan support, is being hailed as the most significant update to securities law since the Jumpstart Our Business Startups (JOBS) Act of 2012. Announced by the House Committee on Financial Services on December 2, 2025, the INVEST Act bundles more than 20 individual bills aimed at three core objectives: broadening access to capital for startups and small-to-mid-sized businesses, expanding investment and ownership opportunities for a wider range of Americans, and lowering the barriers for companies to go and stay public. Proponents argue the legislation will modernize regulations to support the entire lifecycle of a growing business, from its earliest seed funding rounds through a potential initial public offering. One of the most significant provisions in the act is a proposed change to the definition of an “accredited investor.” Currently, the Securities and Exchange Commission (SEC) generally limits participation in private market investments to individuals with a net worth over $1 million (excluding their primary residence) or an annual income exceeding $200,000. Section 203 of the INVEST Act would establish a new, alternative pathway to this status. It directs the SEC to create a competency-based examination, offered free of charge, that would allow individuals to qualify as accredited investors based on their financial knowledge rather than their wealth. This change could dramatically increase the pool of potential investors for private companies seeking capital. For small and mid-sized businesses, the legislation aims to streamline the capital-raising process. The act would establish a dedicated Office of Small Business within several key SEC divisions, including Corporation Finance and Investment Management, to better coordinate matters related to capital formation. Furthermore, it would expand the category of qualifying venture capital investments to include secondary market transactions. This change is intended to provide more liquidity in the private ecosystem, allowing fund managers to recycle capital more efficiently while creating pathways for founders and early employees to realize the value of their equity before an IPO or acquisition. Beyond private markets, the INVEST Act targets retirement savings for a specific but large group of workers. Section 202 of the bill would amend federal securities laws to expand the investment options available to 403(b) retirement plans. These plans serve millions of employees at public schools, universities, hospitals, charities, and other tax-exempt organizations. The legislation would allow these plans to more easily invest in Collective Investment Trusts (CITs), which are often lower-cost investment vehicles compared to the mutual funds and annuities that currently dominate 403(b) offerings. The act also seeks to grant retail investors greater access to private markets through regulated, publicly traded vehicles. It would remove certain constraints on closed-end funds, including Business Development Companies (BDCs), allowing them to invest more of their assets in private funds. According to analysis from the law firm Morgan Lewis, this would facilitate professionally managed access to private equity and venture capital for everyday investors through vehicles listed on national exchanges, an area previously restricted by SEC rules. While the INVEST Act opens up new avenues for capital and investment, the new landscape will require careful navigation for both companies and investors. The increased complexity of the investor pool and the new types of available funding demand a more sophisticated approach to financial strategy. In our experience, access to capital is only one part of the equation; a well-defined plan for how to use it and comply with regulations is what truly drives sustainable growth. The introduction of exam-qualified accredited investors, for example, means businesses must refine their pitch and disclosures for a savvier but less traditionally wealthy audience. This is precisely where a clear-eyed approach to capital raising and investor strategy becomes critical. We have seen many promising companies falter not because of a weak business model, but because their capital strategy was unfocused or they were unprepared for the diligence process. The changes proposed in the INVEST Act make it even more important for business owners to have a robust financial framework and a compelling narrative before they seek funding. For business owners looking to understand how these new rules could impact their growth plans, C&S Finance Group LLC helps businesses navigate these exact challenges at csfinancegroup.com. The INVEST Act now moves to the Senate for consideration. While its strong bipartisan backing in the House provides momentum, its path forward is not guaranteed. Business leaders, investors, and financial services firms will be closely watching the Senate's deliberations in the coming months to see which of these potentially transformative provisions will become law.