You are in need of capital financing for your business or commercial real estate project and considering whether or not the Regulation A securities offering exemption will work for you. Setting aside the legal issues (which are by no means insignificant), this web page focuses on the business issues and process issues you really need to be aware of when considering whether or not to utilize the Regulation A exemption to access the capital markets.
Regulation A Offerings Business Issues
Regulation A has a host of complex business issues that must be given consideration to prior to committing resources to a Regulation A securities offering process or using another regulatory vehicle (like the Rule 506(c) exemption) to raise capital financing. The key business issues attending the Regulation A Tier I and Tier II offering exemption opportunity include: (1) timing and completion; and (2) advance costs of issuance; and (3) qualified businesses.
Timing & Completion Business Issues
Regulation A offerings require the issuer to submit the proposed securities offering due diligence information and offering circular to the SEC for prior approval before any money changes hands. This means that advertising dollars spent in advance of receipt of the approval are highly at risk for loss as the approval can take months to achieve. The SEC pre-approval requirement means that most commercial real estate development project capital financings are not likely to be realistic candidates for Regulation A securities offerings because they are just too time sensitive. Bottom line: if you want to utilize the Regulation A approach, your expectation should be a process that could take as long as a year to complete from end-to-end.
Regulation A Advance Issuance Costs Business Issues
All of the costs associated with preparing the offering due diligence presentation, escrow fees, attorney fees and costs of advertising must be paid in advance. As a rule of thumb, the costs are going to exceed $300,000 for due diligence and the advertising will be no less than 2% of the amount of capital to be raised. Bottom line: if you have not budgeted for the cost of obtaining capital, Regulation A will not work for your business and you may already be a distressed asset financing transaction.
Qualified Business Issuers Business Issues
As mentioned above, the Regulation A approach works for issuers seeking capital financing where the timing of receipt of funds is not critical – how often is that the case? The reality is that Regulation A will not likely work for any issuer who is not already a stabilized operating business. Bottom Line: Regulation A is not the way to go if you are seeking start-up capital, pre-ADC capital financing or ADC phase capital financing for the business. Check with us to determine which alternatives may work best for your business.
The INVIZEN Platform was conceptually designed to support the end-goal of preventing investment losses from being realized on commercial real estate loans and investments.
The INVIZEN Platform design construct offers an end-to-end approach that engages the project or business at whatever life-cycle stage the given project or business may be currently found to be operating within. The INVIZEN Platform is designed to provide a progressive sweep of the entire due diligence spectrum of issues with every review. It starts with the valuation of the transaction opportunity.
Collateral underwriting is important but the reality is that collateral underwriting really only comes into play for EAD calculations and insurance risk mitigation. The value of the opportunity is the real issue and the Verifier Report from INVIZEN directly addresses this issue in terms of determining if the proposed transaction is priced at a discount to market based upon the specific risk profile presented by the project, the project’s business and the project’s market. That’s the Verifier Report.
Market Risk Management
First Look is our real-time market feasibility analysis reporting system for which there is no peer. The next-gen analytics design of First Look provides testing of the empirical assumptions and findings of the market feasibility analysis to determine if a reasonable basis exists for their inclusion and/or use in the resulting report that includes detail you just can’t find anywhere else. That’s the First Look Report.
Financial Risk Assessment Underwriting
Final Check is the crown jewel of the INVIZEN Platform. Final Check provides full capacity risk underwriting, collateral risk underwriting, credit risk underwriting and default risk underwriting financial risk assessment data and findings that is backed by a post-funding monitoring program that prevents the most common causes of credit and default risk events from becoming your loss severity risk realities. That’s Final Check and there is just nothing like it.
The outflow is then matched into our unique credit risk management platform that ties credit risk (again, think hard about managing CECL) and default risk prevention program known as iCREDIT.
This unique system provides real-time forensic auditing of every transaction event and generates an entirely new set of GAAP financial statements for the benefit of all financial partners that can be accessed in real-time.
Financial reporting transparency risk, execution risk, default risk and all of the associated risks are now within the scope of being proactively managed. That’s the INVIZEN approach that makes the difference in everything we do.
We provide opportunities in the form of distressed asset acquisition opportunities for sponsors and developers that meet the specific underwriting standards and requirements of the specific funds and institutions we support.
Our compliance services focus on FINRA (we are a FINRA Compliance Vendor) and supporting broker-dealers, banks (FASB Topic 326 compliance opportunities regarding CECL), credit unions, community banks, advisors, family offices and institutions that are seeking something more than reactive data and mitigation as being the only likely outcome.
INVIZEN is about reaching your peak opportunity efficiency level and having the freedom to focus on transactions that are profitable; transactions that have the likelihood of actually closing.
Clear up your backlog of time-sensitive opportunities.
Reduce your loss reserve calculations.
Turn CECL into a competitive advantage.
Exceed expectations of regulators when it comes to compliance with FINRA, SEC, OCC or the several states.
When you engage with Rainmaker Analytics you are engaging with a team and a system that is designed to make the financial instruments your firm engages in become a matter that is manageable, less frustrating and more profitable.
Your new path forward starts with that first phone call and confidential consultation.