Corporate Finance & Securities

Raising Capital in Washington State: Part 1

You’ve exhausted all sources of funds for your business: family loans, bank lines of credit, and other sources of small business capital. However, you need additional capital to expand, grow and take your business to the next level. It’s time to start thinking about raising capital from investors through a securities offering.

This is the first post of my new series on raising capital and the various options available for your business.

As a brief primer, you should know that all businesses considering a securities offering must comply with federal and state securities laws. The Securities Act of 1933 and 1934 were put in place to protect investors after the market crashed in 1929 and prior to this point in time, securities were chiefly governed by state law. The two main objectives of the Acts were: 1) to require that investors receive significant (or “material”) information concerning securities being offered for public sale; and 2) to prohibit deceit, misrepresentations, and other fraud in the sale of securities to the public.

In order to raise capital for your business via a securities offering, you must either register the securities or find an exemption. If you only remember one thing this article, remember this: securities MUST be registered UNLESS you find an exemption. Nearly all small businesses who are raising capital via a securities offering do so under an exemption because the process and reporting requirements of registering securities is extremely lengthy and expensive.

So what kind of exemptions exist?

The most common types offering exemptions relied upon by small business issuers are commonly referred to as “Regulation D”, or “Reg D” offerings. Regulation D is a set of rules enacted by the federal SEC pursuant to the Securities Act of 1933 which provides exemptions from registration for offerings meeting certain criteria. Many states have enacted rules to facilitate the offering of Regulation D exemptions, including the State of Washington.

There are three exemptions contained in federal Regulation D: Rule 504, Rule 505, and Rule 506. The Washington counterparts to these rules are WAC 460-44A-504 (also known as the Small Offering Exemption or “SOE”), WAC 460-44A-505 (also known as the Uniform Limited Offering Exemption or “ULOE”), and WAC 460-44A-506, respectively.

In our next post, we will dive into the pros and cons of each of these Rules in order to determine which is best for your business.

If you’d like to learn more about raising capital for your business, please don’t hesitate to contact us today for your free initial consultation.


Collin Roberts

When he's not in the office, Collin enjoys IPAs and burgers at Latona Pub.

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