WHAT IS A REGULATION D OFFERING (REG D)?
"Regulation D" is a government program created under the Securities Act of 1933,
instituted in 1982, that allows companies the ability to raise capital though the
sale of equity or debt securities. The programs were designed to provide two main
things - an exemption to sell securities in a private transaction without registering
the securities (something that happens in any transaction involving investors) and
the appropriate framework and documentation for doing so properly. Regulation D
Offerings are the practical method companies use to raise capital from individual
investors
Who should use a Regulation D Offering?
Any company or entrepreneur that
is seeking to raise equity or debt capital from investors should use a Regulation
D Offering, there are 2 basic types of Regulation D Offerings that can be structured:
An "equity" offering is where the company sells partial ownership in the company
(via the sale of stock or a membership unit) to raise capital. Equity offerings
are preferred by early stage companies because there is no set repayment schedule
or debt service payments - the investors profit when the company profits.
A "debt"
offering is where the company raises debt financing by selling a note instrument
to investors with a set annual rate of return and a maturity date that dictates
when the funds will be paid back to investors in full. A debt offering functions
much like a business loan except instead of a bank providing the financing it is
a group of investors lending funds to the company.