The Securities and Exchange Commission (SEC), Office of the Advocate for Small Business Capital Formation, has announced the creation of a capital raising navigator tool for firms seeking growth capital.
A part of the SEC’s website, the tool covers the spectrum of options for entrepreneurs starting with a “friends and family” type recommendation all the way to a registered offering. Of course, in between the two are the various crowdfunding exemptions including Reg CF, Reg A+, and Reg D 506b. There is also the option for an intrastate offering that is only available to people living in the same state as the business operates. Reg D 504 also makes an appearance.
The Advocate recommends that before you raise capital, make sure you are fully prepared:
- Find legal and/or financial advisors with capital raising experience.
- Prepare your investor disclosures, including financials and cap table.
- Hone your pitch.
- Connect to local entrepreneurial support organizations for support.
Reg D offerings are mostly only available to accredited investors – individuals that earn over $200,000 a year ($300,000 for married couples), or who have a net worth of over $1 million minus your primary residence. Most small business advocates believe the accredited definition should incorporate a sophistication qualification that allows individuals who do not qualify under the wealth metric to be able to participate if they have the necessary acumen or education.
Missing from the list is a Micro offering exemption – something that is currently hovering around the halls of Congress. If this becomes law, raising small amounts of capital could become even easier for smaller entrepreneurs.