506(c) funds are a popular financing option for businesses seeking capital from accredited investors. Here’s an overview of 506(c) funds, their benefits, and the role of CapCompass in setting them up.
Overview of 506(c) Funds and Their Benefits
A 506(c) fund allows businesses to publicly advertise their offerings to attract capital but limits participation to accredited investors. This exemption, created under the JOBS Act, has opened doors for businesses to engage a broader audience while maintaining regulatory compliance.
506(c) funds are appealing because they:
– Allow Public Solicitation: Businesses can openly advertise investment opportunities, reaching a wider pool of potential investors.
– Attract Accredited Investors: The limitation to accredited investors often brings in more experienced, higher-net-worth individuals, making it easier to secure large investments.
Legal Requirements and Qualifications
506(c) funds are subject to specific legal requirements, including investor qualifications. To qualify, investors must meet income or asset thresholds set by the SEC. Businesses must also comply with federal regulations, ensuring that all communications and solicitations adhere to SEC guidelines.
CapCompass’s Experience with 506(c) Funds
CapCompass supports clients throughout the 506(c) fund creation process, from developing a compliant structure to managing investor communications, enabling businesses to raise capital effectively and securely.