By Jillian Sidoti
T he JOBS Act (Jumpstart Our Business Startups) was passed in April 2013. It is meant to make it easier for raising capital for small businesses, including real estate companies. So how could you use the JOBS Act to your advantage?
Lift the Ban on General Solicitation
Well, yes, the JOBS Act is supposed to lift the ban on general solicitation for those companies that solicit funds ONLY from accredited investors. However, the SEC met on August 22nd to discuss the rules surrounding this “ban lift” and has delayed voting on it. So as of now, those companies looking for private investors are not allowed to use general solicitation or means of advertising to find investors. (But don’t worry, when I come out in September to speak at REAPS, I will teach you a bunch of awesome ways to find investors without using advertising).
Allow for A Crowdfunding Exemption
“What’s crowdfunding?” may be your first question. Crowdfunding is when companies look for small amounts of capital through a crowdfunding “portal” on the internet from many investors. For example, a real estate investor might need $50,000 to finish a rehab project, so they will post on a crowdfunding portal site to advertise for investors. Many investors will invest through the website and the portal will take care of all the details. Previously, this behavior of putting projects online for investments, was illegal. Now, as long as the portal itself is registered with the SEC, the small company looking for the investment dollars will be exempt from registration. However, the investors investing in the project will not be allowed to invest more than $10,000 or 10% of their net worth. Perfect for those smaller projects you might be working on.
Increase the Amount for Regulation A Filings
Regulation A filings used to be limited to $5,000,000 per company. Now, JOBS increases Regulation A filings are increased to $50,000,000. Regulation A’s, in the past, have not been popular. The reason because they are very hard for attorneys to complete, so they just don’t even offer them to their clients. Personally, the SEC has “lost” 3 of my Regulation A filings. Imagine doing a 700 page filing, sending it off, only for it to be lost by the government. Now, the SEC is reorganizing so there are more attorneys to review these types of filings.
About Jillian Sidoti…
Jillian Sidoti of the Law Office of Jillian Sidoti is the expert on money raising techniques for real estate companies. After working in commercial real estate doing condo conversions for many years, Jillian started a firm that specializes in securities transactional legal matters, such as Private Placement Memorandums, SEC compliance, Regulation A filings, Direct Public Offerings and Intrastate Offerings. Jillian also spends her time speaking at seminars educating real estate investors on how to legally raise capital for their real estate investment projects. Currently, Jillian teaches Finance and Accounting for the BS and MBA programs at the University of Redlands, drawing on her experience as Financial Analyst, Controller and CFO for many companies from manufacturing to real estate development. Jillian also teaches a Small Business Management class where students are taught the anatomy of a business plan.
“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at firstname.lastname@example.org and be our guest for free!”