504, 505 and 506 Placements:
504, 505, and 506 placements deal with the specifics of raising money under SEC Reg D.
Rule 504 generally pertains to securities sales up to $1 million. Rule 505 applies to offerings from $1 million to $5 million. Rule 506 is for securities offerings exceeding $5 million.
-Rule 504
Rule 504 is considered by many as the perfect answer for the company just starting out OR one that needs to raise less than $1 million. Rule 504 offers such companies an exemption to raise up to $1 million, no disclosure criteria, few general solicitation and resale restrictions and no limit as to the number or type of investors.
-Rule 505
Rule 505 is used for offerings of $5 million or less in any 12-month period and is restricted to 35 purchasers other than "accredited investors."
There are a number of required disclosures if the sale of securities includes investors who are not accredited investors: advertising and a general solicitation are prohibited, one must inform purchasers that they receive "restricted" securities (meaning that the securities cannot be sold for a time period without registering them),you must not violate the antifraud prohibitions of the Federal Security Laws, financial statements need to be certified by an independent public accountant or at a minimum, the balance sheet needs to be audited.
-Rule 506
An issuer may issue an unlimited amount of securities, with no dollar limit, to 35 unsophisticated investors plus any number of "accredited investors." There are required disclosures, if a sale of securities includes purchasers who are not accredited investors. All non-accredited investors must be sophisticated and must sign an Investor Questionnaire acknowledging same. Advertising and a general solicitation are prohibited. The securities are "restricted securities" which may not be readily resold. There is a major advantage to 506, in that it supersedes and preempts the securities laws of all the states. This saves a lot of time, effort, and expense if the issuer is obtaining money from investors in multiple states. Form D must be filed with the SEC within 15 days after the first sale of securities and also with the Secretary of State of each state in which a purchaser is a resident.
Below is a complete list of our available funding options. We specialize in effectively preparing the proper documents and getting your financials in correct form to submit applications to the suitable lender or investor. Just click on any of the services below for a glossary of each specific funding instrument: