About 300 small businesses filed so-called small corporate offering registrations to sell stock to the public during the first nine months of 1996, according to SCOR Report newsletter.
The stock offerings, known as Scors, are a rare but increasingly popular form of financing that let small businesses go directly to capital markets to supplement or supplant bank borrowings.
In 1995, about 200 small businesses filed Scors.
Tom Stewart-Gordon, editor and publisher of SCOR Report, said much of the increase in Scor registrations came from physicians groups and beer brewing companies.
Physicians are attracted to Scors because they offer a relatively easy way to set up corporate ownership, and microbreweries use Scors so they can sell stock to their customers, Mr. Stewart-Gordon said.
Because of the time, legal and accounting work needed to prepare the registrations, Scors are often a last resort for undercapitalized companies that cannot qualify for bank loans.
Steve St. Clair, who plans to open a golf course in Lewiston, Idaho, filed Scor registrations last year in Idaho, Washington, and Montana to raise as much as $3 million. The equity Mr. St. Clair expects to raise will supplement a $1 million real estate loan from Money Store Inc.
Although Mr. St. Clair has sold 3,400 shares of stock, he said he would not recommend the process to entrepreneurs who are not fully committed to their businesses.
"It's been a tremendous amount of work," he said, "and you are spending money on attorneys and audited financial statements without any guarantee that you will be able to get the offering completed."
The offerings, which are regulated by state securities commissioners, allow companies to raise as much as $1 million a year from each state where they are registered.
While the 50-question Scor registration form is neither easy nor inexpensive to complete, it is simpler than the corporate offering registrations required by the Securities and Exchange Commission.
Scors must be individually approved in each state where the company sells stock. Approval usually takes about two months.