Rules on Advertising for Private Lender

[Kyle Pettit]

What are the rules for advertising to attract private Lenders. I've attempted contact with 2 different sec attorneys, and I just get the run around. Can I post something along the lines of: "Current investment opportunity available. 10% Return secured with 1st position Mortgage/deed of trust at a Low LTV. Contact me for further details". Thats all I want to know. Thanks! Any knowledgable feedback very much appreciated.

[Matt Rodak]

Hi @Kyle Pettit 

I'm not an attorney but know a bit about the JOBS act and general solicitation per my experience getting my company launched. 

While you could advertise for investors as you suggest, if you do so you will put yourself into the category of a Reg D 506(c). Once you cross into this space, it is difficult to get out. This means that for anyone you take investment money from, you must take "reasonable steps" to verify they are an accredited investor. This means even verifying people you have a pre-exisiting relationship with. 

The main difference here is that if you don't generally solicit, you can have your investors "self-verify" as accredited investors and that is the extent you have to go. Once you advertise, or "generally solicit", you will be subject to the "reasonable steps" law and self-verification will be out as an option - this could impact your current investor relationships.

I should note, this is only one of the perils of "general solicitation" and it also requires you develop sophisticated offering documents that clearly outline all the risks associated with investing with you and in your deals. We've spent a great deal of $$ perfecting ours. 

One way to help manage all of this is to partner with a Crowdfinancing platform. They will help you manage the JOBS act and general solicitation. It comes with a cost of course but if you'd rather focus on doing more deals and less fundraising the cost may be worth it.

Happy to hop on a call to discuss further if you'd like.

Thanks,

Matt