Small businesses that had nothing to do with Wall Street's meltdown hope they won't be hurt by financial regulatory reform legislation.

As the Senate continued to debate the bill, business groups won passage of an amendment that aims to make sure that small firms that allow their customers to pay in installments won't be treated like banks and subject to the regulatory authority of the new Consumer Financial Protection Bureau. Automobile dealers who help their customers get loans but don't make loans directly sought a similar exemption.

Meanwhile, angel investors—and the early-stage businesses that depend on them—pushed to change provisions that would increase the minimum income level for accredited investors and add months to the time it takes to raise capital through private placements.

Protecting consumers from unfair financial products is a key part of the legislation, which also aims to end taxpayer bailouts of large financial firms and regulate over-the-counter derivatives. The bill would consolidate consumer protection responsibilities now divided among various financial regulators in one independent bureau, which would be empowered to issue and enforce new regulations.

The bill's original language could have subjected nonfinancial businesses to these regulations if they extend credit to their customers and the credit is subject to a finance charge or is paid back in four or more installments. The bill, however, exempts merchants or sellers of nonfinancial services from the new bureau's authority if they are "not engaged significantly in offering or providing consumer financial products or services."

Bill sponsor Senator Chris Dodd said this means most small businesses would not be under the consumer bureau's jurisdiction.

"If your orthodontist or doctor or dentist lets you pay your bill over a series of months, they're not covered," he said. "If your local grocer or butcher keeps a tab and bills you at the end of the month, they're not covered."

Many business groups, however, contended the bill left the door open for such businesses to be regulated because the new bureau would define what it means to be "significantly" engaged in financial services. Republicans cited this argument in their unsuccessful amendment to kill the new bureau and create a new consumer office at the Federal Deposit Insurance Corp. that would have much less power.

The Senate later adopted an amendment by Senator Olympia Snowe that provides an explicit exemption from Consumer Financial Protection Board regulation for businesses that only sell nonfinancial products, does not securitize the credit it offers to customers, and meets the government's definition of a small business for their industry.

"While I strongly believe that Congress should pursue the providers of abusive and predatory financial products that harm Americans, we must be careful not to inadvertently target Main Street small businesses," Snowe said.

Chris Walters, a lobbyist for the National Federation of Independent Business, said Snowe's amendment took care of NFIB's biggest problem with Dodd's bill: "It covered businesses that shouldn't be covered."

But Tom Quaadman, a lobbyist for the U.S. Chamber of Commerce, said Snowe's amendment doesn't go far enough because midsize businesses that are not financial in nature could still be subject to regulation by the new bureau. This could increase their cost of doing business and limit their ability to serve their customers, he said.

Automobile dealers, meanwhile, hoped to convince the Senate to follow the House's lead and exempt dealers who help their customers get car loans but don't make the loans themselves. Otherwise, the new consumer protection bureau could dictate an auto dealer's business practices, according to the National Automobile Dealers Association. That's unfair, it contends, since auto dealers had nothing to with the financial crisis.

"They did not cause this problem; they are not going to be the next problem," said David "Tanker" Snyder, a retired brigadier general who is executive director of the Tampa New Auto Dealers Association. "They are not lenders, yet there is this new undefined agency with really unchecked powers."

The Angel Capital Association, meanwhile, is confident the Senate will agree to amendments that would keep the minimum net worth threshold for being an accredited investor at $1 million, instead of raising it to $2.3 million. Under the amendment, however, an investor's house could no longer be counted toward his or her net worth.

Another amendment would remove a provision that could have forced a 120-day review of all Regulation D 506 private offerings, while adding a provision that would disqualify "bad actors" from using this method of raising capital.

"I believe there is good support for making improvements that ensure that small businesses have access to a good pool of angel capital, and that regulations do not make it more difficult and expensive to raise capital," said ACA executive director Marianne Hudson.

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Kent Hoover is the Washington bureau chief for bizjournals.