Funding

Funding Your Business or Project

We recommend that you speak with a Profran Consultants representative to learn about “The Best Kept Secret In Business Funding” a private placement offering. Whether it’s $100,000 or $10,000,000 or more, a private placement offering could be your answer. What is a Reg D Offering?

To evaluate your project or funding requirement you will need to complete the following 1 page information sheet, CLICK HERE

Reg D 504
This rule is considered by many as the perfect answer for the company just starting out that needs to raise less than $1 million but can’t afford to go through the whole SEC registration process. Until they grow to a point where they can afford it, Rule 504 offers such companies an out:

An exemption to raise up to $1 million
No disclosure criteria
Few general solicitation and resale restrictions
No limit as to the number or type of investors

Actually, Congress’s original intent in 1982 for Rule 504 was to “set aside a clear and workable exemption for small issuers to be regulated by state blue sky requirements, but by the same token, to be subjected to federal anti-fraud provisions and civil liability provisions.” Rule 504 exemption is provided for almost any type of organization, including corporations, partnerships, trusts, or other entities. However, it is not applicable to companies already reporting to the SEC (subject to the ’34 Act) or investment companies.

Reg D 506
Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(2) of the Securities Act. Companies using the Rule 506 exemption can raise an unlimited amount of money. A company can be assured it is within the Section 4(2) exemption by satisfying the following standards:

The company cannot use general solicitation or advertising to market the securities;The company may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchases. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticatedâ€”that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;

Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well;

The company must be available to answer questions by prospective purchasers;

Financial statement requirements are the same as for Rule 505; andPurchasers receive “restricted” securities, meaning that the securities cannot be sold for at least a year without registering them.

While companies using the Rule 506 exemption do not have to register their securities and usually do not have to file reports with the SEC, they must file what is known as a “Form D” after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company.

In February 2008, the SEC adopted amendments to Form D, requiring that electronic filing of Form D be phased in during the period September 15, 2008 to March 16, 2009. Although as amended, the electronic Form D requires much of the same information as the paper Form D, the amended Form D requires disclosure of the date of first sale in the offering. Previously, the closing date of an offering was used as the first date of sale. The Office of Small Business Policy has posted information on its web page about the filing requirement for the new Form D.

If you are thinking about investing in a Reg D company, you should access the IDEA database to determine whether the company has filed Form D. If you need a copy of a Form D filed as a paper filing (which will include any Form D filed before September 15, 2008), you can request a copy using our online form. If the company has not filed a Form D, this should alert you that the company might not be in compliance with the federal securities laws

You should always check with your state securities regulator to see if it has more information about the company and the people behind it. Be sure to ask whether your state regulator has cleared the offering for sale in your state. You can get the address and telephone number for your state securities regulator by calling the North American Securities Administrators Association at (202) 737-0900 or by visiting its website. You will also find this information in the state government section of your local phone book.