How Reg A+ enables raising up to $50 mil from the general public

Given that only a few marketplace lenders accept money from retail investors, Regulation A+ may be a viable option to help these platforms diversify their funding sources away from institutional capital.

One of the overarching themes at LendIt 2016 last week was the current liquidity and funding challenges in the capital markets and platforms’ difficulty in raising new venture capital. It was apparent to many industry participants that there is a need to diversify sources of funding. I had the pleasure at LendIt to sit down and discuss Regulation A+, a new capital raising option for startups and emerging growth companies, with Jason Gilbert, a Partner in the San Ramon office of Armanino LLP. Armanino is the largest independent accounting and consulting firm based in California and one of the largest firms in the U.S. Jason has extensive knowledge in crowdfunding and helps emerging companies navigate this brand new capital channel. He advises clients on everything from annual assurance services, day-to-day accounting, offering document structuring, back office operations, and management software.

REG D

$50 million in a 12-month period with no restriction on the number of investors
As part of the JOBS Act of 2012, Regulation A+ (“Reg A+”) became effective on June 19, 2015. The original Regulation A limited startup fundraising to $5 million in a 12 month period, and to only 35 non-accredited investors. The new and improved Reg A+ now allows startups to raise up to $50 million in a 12-month period with no restriction on the number of investors. This vastly increases the pool of eligible investors; over 90% of the investing public previously couldn’t invest in startups even if they understood the risk and had the liquid capital to deploy, because accredited investors make up less than 10% of the US population, according to the SEC. For the first time, private emerging growth companies can raise money from nearly all Americans.

Sharestates filed for $50 million Reg A+
Some in the securities industry have referred to Reg A+ offerings as “mini IPOs” because a logical use is to raise equity capital in early funding rounds for startups. In fact, most of the Reg A+ deals announced to date have been common equity offerings, with a few preferred equity offerings. However, as Jason explains, Reg A+ offerings can be for any type of securities: debt, equity, convertibles, etc. In December 2015, Sharestates, a marketplace lender catering to small business borrowers, filed a Reg A+ offer to raise up to $50 million in debt securities.

What are the steps ?
Companies looking to raise capital via Reg A+ still need to file and be approved by the SEC before launching an offering. But Jason pointed out that one of the big benefits for a company considering a Reg A+ offering is that can “test the waters,” or get indications of interest, before proceeding with a public securities offering. In other words, an issuer can contact investors with potential terms of the offering in order to make an educated decision on whether or not to proceed with an offering, and before spending time and money on the process.

Tier 1 vs Tier 2 offering
Jason also detailed for me some of the main differences between Tier 1 and Tier 2 offerings:

While Tier 2 offerings allow for raising up to $50 million in a rolling 12-month period, Tier 2 filers are subject to ongoing SEC reporting following the raise. Tier 2 issuers must file audited financials annually and must abide by more stringent reporting requirements. However, they are exempted from state registration requirements.

Tier 1 offerings are limited to $20 million during a 12-month period, but are not required to file audited financials, and ongoing filing requirements are much less stringent. However, Tier 1 issuers are required to register their securities under the Blue Sky laws of the states in which they are sold (or qualify for an exemption). But because most states would have their own requirements for audited financials as Jason noted, the odds are that most Reg A+ issuers will likely end up filing for a Tier 2 offering.

Difficulty of Reg A+
Like any offering, Regulations A+ has its own unique benefits and things to consider with regards to regulatory compliance. It is important to have strong partners that can help the issuer to prepare for the reporting requirements that go along with such an offering, and to guide the issuer through the registration process. California-based Armanino LLP is in the unique position of being well versed in Regulation A+ and has a deep expertise of emerging companies who have outgrown their small shop solution. These companies need advisors who can grow with them, help them with their strategic position, manage their day-to-day operations, and remain in regulatory compliance.

mark-d-smith-150x150 (1)
mark-d-smith-150x150 (1)

About Jason Gilbert and Armanino LLP

Jason has more than 10 years of public accounting experience, with specialized expertise in the real estate lending sector, including private equity funds, real estate crowdfunding and peer-to-peer portals. In addition to annual assurance services, he helps these clients with day-to-day accounting, the structuring of offering documents, financial close, back office operations and fund management software. He is also a key member of the private education practice. He has extensive experience helping private schools with value-added initiatives, including key performance indicators and peer-to-peer benchmarking. Jason is a member of the American Institute of Certified Public Accountants, the California Society of Certified Public Accountants, the California Mortgage Association and the American Association of Private Lenders. He earned his BS in business administration and his MBA from California State University, East Bay.

Armanino LLP is the largest independent accounting and consulting firm based in California and one of the largest firms in the United States. Armanino provides an integrated set of audit, tax, consulting, business management, and technology solutions to companies in the U.S. and globally. Armanino extends its global services to more than 100 countries through its membership in Moore Stephens International Limited—one of the world’s major accounting and consulting membership organizations.

source
http://lending-times.com/how-reg-a-enables-raising-up-to-50-mil-from-the-general-public/

Tags: , , , , , , , , , , , ,

HEADLINE NEWS

The VergeDonald Trump's terrible crowdfunding site was a microcosm of his political careerThe VergeAnd from the beginning, the site had Trump's populist edge. Zanker boasted that “the reign of Kickstarter's Brooklyn hipsters is over,” referring to Kickstarter's New [...]

Social media, crowdfunding skirmishes encapsulate Endy debateThe Herald JournalAfter that, a campaign with the same goals and the same organizer appeared on a separate crowdfunding site, FundRazr.com. This campaign also drew negative attention on social media, and after a few hours th [...]

FortuneCrowdfunding: Women Better at Raising Money Than Men Are ...FortuneA new study has found that women are generally better than men at crowdfunding.Women are better at crowdfunding than men, shows study | The ...The Independentall 3 news articles » [...]

ForbesCrowdfunding's Death Has Been Greatly Exaggerated - Creators Ship, Especially In ChinaForbesBased on recent media reports, it looks like crowdfunding is now in the "disillusionment" phase of the famous Gartner hype cycle, after peaking a few years back. I will arg [...]

Wired.co.ukAfter budget cuts, museums are crowdfunding to preserve historyWired.co.ukIn 2015, the Smithsonian National Air and Space Museum in Washington, D.C. launched its very first crowdfunding campaign to 'Reboot the Suit'. The idea was to raise much-need funds to conser [...]

How Women Trounce Men When Raising Seed Crowdfunding CapitalForbesMale entrepreneurs may account for the majority of business owners raising finance on crowdfunding platforms in the UK, but their female counterparts are far more likely to get the support they seek, new research shows. [...]

ReutersStudy says women are better at crowdfunding - ReutersReutersWomen around the world are less likely than men to tap the crowd online for money to fund their businesses and projects, but when they do they are likely to.and more » [...]

YourStory.comA crowdfunding portal ensuring total authenticity of cases, MeHelp lets you donate confidentlyYourStory.comIn March this year, Samiya Hafeez, a 22-year-old woman from Hyderabad, was arrested for running a fake crowdfunding campaign through which she collected almost Rs 22 [...]

Yahoo SportsCan crowdfunding save women's college hockey? - Yahoo SportsYahoo SportsNorth Dakota cut its women's hockey program in March, in one of the saddest and most stunning decisions to rock the sport at the collegiate level. “When you ...and more » [...]

MashableAtaribox crowdfunding plan is a giant, flapping red flagMashable"To limit risk taking, this product will initially be launched within the framework of a crowdfunding campaign," the note — translated from French — reads. It may not have been uttered by a PR mouthpiece [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |