News & Updates



 
ULOR Registration

Wednesday, February 24, 2016                                                                                                                                                                                                                               

THE  UNIFORM LIMITED OFFERING REGISTRATION   A Unique Financing Vehicle for Small Business

For Master Filing Kit Contact  
Lou@easybusinessloans.info

Dear Fellow Entrepreneur,



"Because of the love affair between the American
public and small business, it is possible for any
entrepreneur, technological visionary, and
inventor of every sort to get financing."

 

Use This Extraordinary

Fund Raising Instrument.

 Get Financing for Your Business

 Raise Up to $1,000,000 Million a Year

“Filling In The Blanks”

Using a Unique, Little-Known Money Source to

Fund Nearly Any Business You Like.


 



   


                                          
 


 
Testimonals

Mike Johnson

"The first time I heard about the ULOR I was really interested in knowing more. At first I thought it was too difficult How could funding be this easy and how could this work for me? Anyway, given that it was so cheap I tried it, and it worked!  I checked it out and, It is real, it's Federal SEC Law so you know its real.  And it worked for me. Now I know how to raise all the funding when I need it.

William Victor
Texas, United States

"This funding Secret is revolutionary. I became instantly intrigued and decided to give it a try  Now, whenever I look at my balance sheet, I cannot take the smile off my face! My financials come in the form of a positive credit – the banks are  paying me for the extra money that I have in my account"



Kevin Miller
 
"I never imagined that it was possible to get almost Free Money . I have seen a lot of funding methods offering ways to obtain small business funding and I have tried most of them. To my dismay, they are all useless and I just wasted my money trying them. When I found out about the  ULOR ,  I knew that if someone would have created a great funding program , it would have been the SEC and the financing geniuses on Wall Street.

  I hope that many more people will use your product. Thank you so much! "
 


George Cinail

"Like many people needing to raise business funding , I have always wanted to find a way to raise money. I knew there was a way to do it. because it was being done everyday.  but no one I talked to seemed to know how until I found out about the ULOR offering . I am sure that many more will embrace the concept of Equity fund raising. My future is much better now!"

 


Davids Write

"Today, I am taking some time out of my daily routine to thank you for the marvellously rich information I got from your program. I bought it because I found a lot of positive reviews on various websites. and the Price was really inexpensise compared to all the other services out there.  Not only was I able to understand how the program works, I was able to file on my own! I never thought it could be so easy. The instructions were very well described in layman's terms. I would recommend this to anyone who needs to raise equity funds"
 


Ronni Anderson
Hawaii

"Traditional Funding sources are very expensive and there is no way that one can be sure you will ever get funded .Every body wanted $10,000 or more to do this. When I got your program, for only $600 , it gave a new meaning to “small business funding.” The manual showed me how to file a Small Company Offering Registration Exemption  that works  This way, I can raise funds every time I need to for my RE Deals.  
Many thanks to you!"

 


Tom Danzes

"When I bought the ULOR Master Business Success Kit , I did not really believe that it was so simple. I gathered all the required Documentation and it took me about three weeks to complete.
I am not an expert in financing but the fill in the blanks question and answer format  was easy to understand. To my surprise, It works!   It's a really nice feeling getting the money you need.."



Sam Koenig

"For an entire year, my family and I were breaking our heads trying to figure out how to raise funding. I told myself that I will not give up onmy good business idea. Then, I found your website.  At first, I was skeptic, but I tried it anyway's. First, I made a small offering  –and it worked! Now, I will file a for a much latger amount next time. Thank You"
 

  

Regulation D, Rule 504 (Rule 504) exemption coupled with a uniform state small corporate offering registration (SCOR - ULOR) filing is the most common route taken for small businesses that are interested in raising capital from the public by issuing securities (Equity). 

Both the federal exemption and the state filing limit the amount raised to $1 million in a one-year period. To prevent abuse, a second offering cannot be made for six months after the first 12 months expire. Effectively, the small business owner could rely on this combination to raise $1 million every 18 months.

The Rule 504 exemption contains no onerous restrictions (other than the $1 million limitation). The issuer is free to advertise the securities and to solicit potential investors. In addition, there are no restrictions on the number or type of investors. Nor are there any resale restrictions on the securities.

The SEC requires that Form D be filed after the first sale, notifying the SEC that the issuer has used the exemption. However, it is wise to file this form prior to offering the securities for sale, in case the SEC has any questions related to registration and exemption, and refrain from any advertisements, offers or sales until the SEC approves the form.

The intent of Rule 504 has always been that the issuer registers the securities in each state in which they are offered for sale and comply with the registration requirements imposed by the states. This is why under Rule 504, the issuer faces no real federal restrictions related to the sale--the states are supposed to be the watchdogs.

The current rules effectively limit the use of Rule 504 to those offerings made only in states where registration is required or is exempt only with restrictions, such as bans on general advertising of the securities, limits on the numbers and types of investors, etc. The result is that, today, an issuer who wants to raise capital from the public through a general solicitation, and rely on Rule 504, will have to register the securities in the states through a SCOR filing.

  
Up to $1,000,000 Per Year of No-Repay Money for Your Business!


This method has been used by corporate financing experts every day for years.

But you probably never heard about it!  WHY? 
Because Stuff like this is kept super top secret
They don't want you to know about this.. 

It's so effective you won't beleive it! The first thing you have to do is file a ULOR.
If you want to legally open a busness, the first thing you do is file a DBA with the clerk at your country courthouse.  
With that verified document you can now open a bank account under the business name and get a business license.

If you want to get funding from Private investors the first thing you do is file your ULOR

SO WHAT IT IS A ULOR  (SCOR)

The ULOR, or Uniform Limited Offering Registration

It's an easy way to get cash for your small business or investment property.
The hassles and headaches of regular bank loans are eliminated. 
You get a more streamlined financing method that's quick,clear,easy and professional! 

Here are a few of the highlights:
  • Raise up to $1,000,000 million of no-repay money every year
  • You can fund nearly any business or real estate activity
  • We have the ULOR forms already set up for you
  • You “fill in the blanks” with information about your corporation.
  • Your completed form is your business plan
  • Once you file your ULOR, your company name will be widely recognized.
  • Giving you more and better access to professional certified financial investors
  • Without a ULOR filing certified investors {aka Angel investors} cannot fund you.
  • Increase your ability to attract highly qualified personnel to your firm

Small businesses always have trouble raising capital. They have the following options to raise equity capital:

1) They can run on the owner’s capital, including borrowing on home equity and credit cards.
2) They can borrow from a bank, (if they can)  at relatively high interest and with dangerous cash drain impacts.
3) A few can obtain venture capital.
4) They can sell equity securities, which is in many respects the preferable way to fund most early stage businesses.

SMALL BUSINESSES HAVE PROBLEMS SELLING SECURITIES
The process of selling securities is very complicated. 
A maze of federal and state regulations of mind-glazing complexity must be negotiated. 
The most useful exemptions that allow small businesses to sell securities require that 
 they be sold to sophisticated, well-heeled investors. 
But, with limited exceptions, small business owners are not allowed 
to advertise their investment opportunities. 
How then can they find sufficient investors (unless they are socially fortunate)?     

A Unique Financing Vehicle for Small Business
WHAT ARE THE ADVANTAGES & DISADVANTAGES OF “GOING PUBLIC”
Advantages:
* Recognition of the company name, product and/or service will increase 
(new stockholders, securities analysts, the business press, and others want to learn more about you) · 
more interest means more business

* Increased awareness in the investor and banking communities should make future financings easier to obtain

* Access to capital, both equity and debt financing, will increase

* An equity offering, from a lender's perspective, strengthens your financial condition (reduces leverage)

* A successful offering develops your company's track record · The public is able to invest

* Ability to offer stock options and stock bonuses may help you attract and retain highly qualified personnel

Disadvantages:
* Responsibility to inform shareholders and the general public on an annual basis 
    about the company's operations and performance

* Ownership will be diluted

* Decision-making may require shareholder approval

* The possibility exists for less control by the original company founders

HOW DOES A SMALL COMPANY KNOW IF IT SHOULD "GO PUBLIC"
* Management Attitudes, 
* Are the founders willing to give up total ownership of the company?

* Additional Costs, · Is management able to devote its time or to purchase outside experts 
    to structure the offering and maintain the disclosure requirements?

* Management Team, · Is the leadership, financial, marketing and operating expertise 
in place and will it foster investor confidence?

* Growth Potential: Sales, Income, Assets,  · Realistically, can the company offer a rate of return 
to investors that is equal to or greater than other investment alternatives?
* Value of Corporate Stock

*  Is management able to convince potential investors and/or broker/dealers that the 
percentage of stock for sale is priced correctly in relation to total corporate worth?  
For example, if 10% of the company is sold for $1 million, is the total company worth $10 million?

ADVANTAGES OF "GOING PUBLIC" WITH A ULOR FILING
* Exemption from federal (SEC) registration.
* U-7 format is similar to a business plan.
* U-7 form is used as the registration statement and the investor prospectus.
* U-7 form follows a question and answer format designed to be drafted by management or its financial team. This will reduce legal fees.
* Offerings under $500,000 are allowed to submit reviewed financial statements. This will reduce accountant fees.
HOW TO "GO PUBLIC" WITH A ULOR FILING
Eligibility:  All U.S. corporations may "go public" with a ULOR filing with certain exceptions. 
Specifically, the form may NOT be used to register securities for resale on behalf of anyone 
other than the corporation, itself · 
By partnerships · 
By companies in the business of petroleum exploration or production, 
those engaged in mining or those in other extractive industries

 By "blind pool" offerings (as defined in A.R.S. § 44-1801)
 If the company, or any of the company's management or 10% or greater stockholders, 
have had certain past regulatory problems

Additionally, investment companies (mutual funds, etc.) may not use Form U-7, 
nor may public companies that report to the SEC under Sections 12 or 15(d) of the Securities Exchange Act of 1934.

Technical Requirements:
* Up to $1 million may be raised every 12 months
* The offering price must be at least $5 per share
* The company may not split its stock or declare stock dividends for two years, 
        except with the permission of the Securities Administrator

 Procedural Steps:
* Get the  a U-7 form and instructions for your State
* Review the U-7 form to determine if a small corporate offering is 
   the best capital formation tool through which to raise funds for your company -- if yes;

* Organize your team for answering the U-7 form (management, attorneys and/or accountants)

* Consider who will value your stock and who will sell your stock (management and/or a broker/dealer)

* Contact the Securities Division, Registration Section with questions or a request for a pre-filing conference

* File the Form U-7 with the Registration Section

* File the Form U-7 with the National Association of Securities Dealers (NASD), if your securities are to be sold by a registered broker dealer

* Review process begins at the Securities Division, Registration Section. Structural issues of the offering are examined

* Notification by the Securities Division as to registration of corporate offering

* Notification by the National Association of Securities Dealers (NASD) as to approval of underwriters compensation

* Form U-7 becomes the corporate prospectus

* Sale of stock commences. Registration is valid for one year and may be extended upon reasonable request to the Securities Division

* Submission of annual reports to your State's Corporation Commission, Securities Division; and securities-holders

HOW TO SELL YOUR STOCKS OR BONDS THROUGH A ULOR REGISTRATION
Sales Through Company Officers:
* Advertisements (Tombstone)
 * Mailings
* Investor Meetings
* Press Releases
* Sales Efforts in Jurisdictions where registered or exempt Sales Though A Commissioned Broker/Dealer:
* Advertisements (Tombstone)
* Calls to Client Base
* Sales Efforts in Jurisdictions where registered or exempt · 

Potential to Form Broker/Dealer Syndication to Sell As of January, 1996, 
the Form U-7 may be utilized in all state jurisdictions under a specific ULOR statute, 
or in connection with registration by qualification, except for the following: Florida,
Alabama, Hawaii, Nebraska, and the District of Columbia.

The Form U-7 may be utilized in these jurisdictions under a specific ULOR statute or in
connection with registration by qualification.
Arizona
Alaska

Arkansas 1
California
Colorado
Connecticut
District of Columbia 1
Florida 1
Georgia
Idaho
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland 1
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nevada
New Hampshire
New Jersey
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington State
West Virginia
Wisconsin
Wyoming



Merit-review states. Although the form used for a SCOR registration is uniform, the registration request is not treated identically when it reaches the individual states. Most states are "merit-review" states. They review the offering to determine whether it is "fair" to investors. In the merit-review states, if the regulators believe the offering is not fair to investors, they will not approve it. However, even within the merit-review states, there is a wide range of scrutiny accorded the SCOR form.

The following merit-review states have a reputation as being progressive toward SCOR filings:

  • Arizona
  • South Carolina
  • Iowa
  • Washington

The following merit-review states have a reputation as bring a little more difficult toward SCOR filings:

  • California
  • Massachusetts
  • Texas

The small business owner making a public offering of securities may want to consider offering the securities only in the non-merit-review states and the merit-review states with a progressive stance toward SCOR offerings

 

 

  SHORT LIST OF SOME SCOR (ULOR) Friendly Funding Sources

1.   SOCIAL LENDERS
        WHAT ARE SOCIAL BUSINESSES AND SOCIAL INVESTORS?
A "SOCIAL BUSINESS" IS A BUSINESS CREATED TO help a specific social cause or issue,
such as health care for the homeless, protection of the environment, education for kids with
learning disabilities, drug abuse prevention, low-cost housing, and so on. A "social venture",
"social venture capital firm", or "social investor" is a firm or person which provides money for a
social business.
ALTHOUGH THERE ARE THOUSANDS OF NONPROFIT ORGANIZATIONS with goals
like those of social businesses, there is a big difference. Social businesses are run for profit, but
they funnel most of their money back into achieving their social goals. Nonprofit organizations get
their money from grants or charities.
IF YOU'VE NEVER HEARD OF SOCIAL BUSINESS before, you may be surprised to learn
that many millions of dollars are pumped into such businesses every year. Social business really is
a big business.
GET TO KNOW THE MOVERS AND SHAKERS in this field, along with the ways in which
social business works, and you may find a financially rewarding niche in this growing field. Here's
a list of 25 social ventures and investors that make loans or investments to social businesses.


2.   LARGEST DIRECT FUNDERS
WHAT ARE DIRECT LENDERS?
Most of these lenders make more than $ I-billion per year in various types of commercial and real estate loans. So what
makes them direct lenders? Many of our readers are pleasantly surprised when they learn that direct lenders
are mortgage lenders that make deals mostly over the phone (loans-by-phone). Some of them also deal
through the mail (loans-by-mail) or even on the Internet (Internet loans).
There is a second defmition of direct lenders; it refers to lending institutions that do not base their loans on
the use of brokers. Because the direct lender uses no middleman, the direct lender typically has more
control over the loans it approves. Loan applications from direct lenders are usually similar to those
provided by indirect lenders.

3.   LARGEST DIRECT FUNDING 2

4.   CONSTRUCTION FUNDING

5.   RETAIL SHOPPING MALLS
They include property/ loan types such as Anchored Shopping Centers, Lifestyle Centers,
Regional Malls, Super Malls, Retail Outlets, Retail Strip Centers, Local Shopping Centers, Local
Retail Stores, Large "Box" Stores, and, to a lesser extent, Online Internet stores-to name a few.
Here we'll use the phrase "shopping malls" to include all types.
WITH LOANS TYPICALLY IN THE RANGE of $1,000,000 - $500,000,000, the need for
shopping mall loans attracts joint ventures, commercial lenders, loan brokers, SBA guaranteed loans,
equity financing, and more, for Construction, Development, Purchase, Refinance, Rehab,
Acquisition, etc. This is really big business-not for the casual borrower or the faint of heart.
JUST ABOUT ANY BUSINESS THAT SELLS THINGS DIRECTLY TO CONSUMERS is a
retail business. Real estate loans for retail businesses are a type of commercial loan. For obvious
reasons, shopping centers and malls comprise the biggest deals in terms of the total amount of
funding.
SELLERS OF THESE KINDS OF PROPERTIES OFTEN NEED FINDERS who can refer them
to lenders providing bridge loans, closing costs and other money to make a deal possible. A loan
finder can work on either "side" of a deal-that is, for the buyer or the seller, but not both at the same
time.

6.   SENIOR HOUSING and FACILITIES
SENIOR HOUSING FACILITIES ARE MAJOR TYPES of real estate investment and
loans. This form of real estate is not, however, confined to homes or apartments for the elderly.
Today senior housing is often referred to rightly as senior living. It includes facilities and real
estate for assisted living, "55-plus lifestyles," adult nursing care, independent residences, short term
care and more.  LARGE LOANS ARE MADE FOR ALL DIFFERENT TYPES of senior facilities.
Typical loans provide financing for construction, rehabilitation, acquisition or refinancing of senior
facilities. The most common type of loan used for senior housing is a commercial construction
loan. Home mortgages for seniors are another form of seniors lending. The demand for such
properties continues to increase each year.

7.   AIRPLANES & HELICOPTERS
Aircraft loans are a special niche all their own. While traditional banks and mortgage companies are
struggling to survive, this lending niche keeps attracting aircraft buyers, lenders and investors.
Perhaps you or someone you know dreams of buying, flying or just plain brokering one or more planes,
helicopters, ultralights, hang gliders-the list of aircraft types goes on and on.
Here are more than 60 lenders of all kinds offering aircraft loans for commercial and private airplanes,
helicopters and other flying machines. This listing will help you find lenders that are making aircraft loans.
You might find the aviation loan for yourself or for a client and earn a Finders Fee or commission for
matching you client with the right lender. As always, be sure to contact several lenders before choosing a
particular loan. It's a good to get at least three quotes. Each lender has different rates and incentives.
Many aircraft financing and loan companies allow you to apply online or over the phone. Whether you
wish to purchase or lease, now may be a good time to act while interest rates are still low.

8 .  BUYING OR REHABBING APARTMENT BUILDINGS
LENDERS THAT MAKE LOANS FOR APARTMENT BUILDINGS (also called multi-family or
MFH housing) can be found in most urban and suburban areas in large numbers.
ADDITIONALLY, THE FEDERAL HOUSING ADMINISTRATION (FHA), the U.S. Department of
Agriculture (USDA), Fannie Mae and and Freddie Mac provide certain loan and assistance programs for
purchase, refinance, and rehabilitation of MFH. Apartment buildings are often big-ticket items and the
smart money broker can land huge fees for snagging good deals for buyers, owners and developers.
A MULTI-FAMILY BUILDING IS ONE THAT HAS FIVE OR MORE UNITS. The most common
purpose of most apartment building loans is to fund the purchase or refinance of a multi-family building.
Loans for rehabbing buildings are just as important.

9.   MINORITIES
AFRICAN-AMERICAN. HISPANIC-AMERICAN, ASIAN AMERICAN BANKS, WOMEN OWNED BANKS

10. MINORITY OWNED BANKS NICHE LENDING: MINORITY-OWNED AND WOMEN-OWNED LENDERS
Nearly all successful money finders continually scout for new money sources to put in their
"toolboxes" for possible future use. Oftentimes a lender might have a special kind of ownership or
might specialize in funding for particular niches. Two such niches are minority-owned and
women-owned lenders in the United States and Canada.
Finding money through niche lenders can be very lucrative. Money finders can specialize in
various niches, becoming the "go-to guys" for those niches. This can make the finder an expert in
various niches over time. And the more specialized the finder's knowledge, the more money
clients pay for specific services you can provide.
So here are more than 35 top minority-owned and women-owned banks. These banks are
sitting, doors open, and waiting for a bright money finder to connect them with possible
borrowers in their communities. Whoever makes the right connections, might win a nice big
finder's fee.

11. MORTGAGES
The restaurant business ranges widely from small mom and pop establishments to fine dining, ethnic
foods, fast food, multi-state franchises and many more. Whether it's a startup loan, bridge loan, expansion
loan, factoring or an equipment lease, nearly every restaurant needs financing at some point in its growth.
Restaurant funding can include commercial bank loans, SBA loans, seller financing, partnerships, venture
capital, and a combination of financing sources. People and companies that make these loans happen may
stand to gain finder fees from the restaurant owners or the company/institution providing loans.
The listing below contains top lenders to the restaurant business in the United States. For your
convenience, we give an example of how you might estimate the startup cost of a restaurant. This might
come in handy when you want to determine how big a loan a restaurant needs to get started. This is only one
of many ways to look at restaurant loans. Keep in mind that finders fees can be figured in different ways,
may come in various forms and may not always be called finder fees.
Sample estimate for a restaurant startup cost: the cost of typical restaurant items needed for a new
restaurant might be figured as follows:
Land and building site + Construction + Furniture and fixtures = Restaurant startup cost

12 .MULTI FAMILY HOUSING 1
MANY LAND AND LOT LOANS ARE USED TO buy land for eventual development and
building. Early on, however, the potential borrowers and buyers might not be ready to begin
construction. It can be easier and simpler to get a land loan to buy the land than it is to finance
development and building.
LAND AND LOT LOANS, as their names imply, are loans used to purchase, refinance, improve or
develop raw land, commercial properties, rural homes, farm land, recreational land and land lots.
Land loans and lot loans can be financed through traditional commercial loans, hard money loans,
construction loans or other methods. LAND AND LOT LOANS ARE OFTEN USED AS
PURCHASE MONEY loans for borrowers who aren't ready to begin construction or to get a
construction loan. Typically, lenders require that the lot must be normal for the area and one or more
utilities should be available to the property.
ALSO KEEP IN MIND THAT LAND MAY CONTAIN valuable natural resources, such as
natural gas, minerals, oil, and so on.

13 . NATIONWIDE FINANCING FOR RESTAURANTS
The restaurant business ranges widely from small mom and pop establishments to fine dining, ethnic
foods, fast food, multi-state franchises and many more. Whether it's a startup loan, bridge loan, expansion
loan, factoring or an equipment lease, nearly every restaurant needs financing at some point in its growth.
Restaurant funding can include commercial bank loans, SBA loans, seller financing, partnerships, venture
capital, and a combination of financing sources. People and companies that make these loans happen may
stand to gain finder fees from the restaurant owners or the company/institution providing loans.
The listing below contains top lenders to the restaurant business in the United States. For your
convenience, we give an example of how you might estimate the startup cost of a restaurant. This might
come in handy when you want to determine how big a loan a restaurant needs to get started. This is only one
of many ways to look at restaurant loans. Keep in mind that finders fees can be figured in different ways,
may come in various forms and may not always be called finder fees.
Sample estimate for a restaurant startup cost: the cost of typical restaurant items needed for a new
restaurant might be figured as follows:
Land and building site + Construction + Furniture and fixtures = Restaurant startup cost

14.  RAW LAND AND LOT
MANY LAND AND LOT LOANS ARE USED TO buy land for eventual development and
building. Early on, however, the potential borrowers and buyers might not be ready to begin
construction. It can be easier and simpler to get a land loan to buy the land than it is to finance
development and building.
LAND AND LOT LOANS, as their names imply, are loans used to purchase, refinance, improve or
develop raw land, commercial properties, rural homes, farm land, recreational land and land lots.
Land loans and lot loans can be financed through traditional commercial loans, hard money loans,
construction loans or other methods. LAND AND LOT LOANS ARE OFTEN USED AS
PURCHASE MONEY loans for borrowers who aren't ready to begin construction or to get a
construction loan. Typically, lenders require that the lot must be normal for the area and one or more
utilities should be available to the property.
ALSO KEEP IN MIND THAT LAND MAY CONTAIN valuable natural resources, such as
natural gas, minerals, oil, and so on.


15.  RELIGIOUS GROUPS

16.  SAVINGS BANKS AND S&Ls-SOURCES OF PERSONAL LOANS
THESE ARE SAVINGS BANKS AND S&Ls located throughout the United States that make
personal loans. Finders or brokers may request that the client pay a finder's fee-typically around
1-5 percent-from an individual or business in exchange for securing a loan or at least a loan
review from a potential lender.
Note: Some lenders may require that an individual become a member of the bank before applying
for a personal loan from it. As with most lenders, the borrower will have the most success
applying to banks and S&Ls in their geographic area.

17.  SBIC's
SBICS ARE PUBLIC/PRIVATE PARTNERSHIPS between the U.S. Small Business
Administration (SBA) and private venture capital/business angel firms, The SBle program was
established by the Small Business Administration (SBA) to help small businesses and
entrepreneurs get financing.

18.  SBICs 2

19.  SBIC's Venture
LOOKING FOR VENTURE CAPITAL MONEY? TRY SBICs
SBlCs (SMALL BUSINESS INVESTMENT COMPANIES) are public/private partnerships
between the U.S. Small Business Administration (SBA) and private venture capital or business "angel"
firms. The SBA calls SBICs the largest "fund of funds" for entrepreneurs and investors in the U.S. SBICs
therefore are an important potential source of financing for most small businesses.
The pages below this box list currently licensed SBICs by state. The number of SBICs is too large
to fit into one issue of MWB, so we'll present portions of them in individual issues.
WHETHER YOUR BUSINESS OR THAT OF A CLIENT is in the early stages of development or
already thriving and seeking growth capital, you might want to see if SBIC funding is right for your
company--and if so, which SBICs might be willing to consider such an investment.
SBICS USE THEIR OWN CAPITAL AND FUNDS borrowed from the SBA to provide financing to
small businesses and real estate projects in the form of equity securities and long-term loans.
An SBIC may be a member of the SBA SBIC program described here and/or a member of NASBIC, the
National Association of Small Business Investment Companies (NASBIC). An additional type of
SBIC is the SSBIC (Specialized Small Business Investment Company). SSBICs are SBICs that specifically
make loans to businesses run by socially or economically disadvantaged people. SSBICs were formerly
known as MESBICs (Minority Small Business Investment Companies). Like regular SBICs, SSBICs are
licensed by the SBA. SSBICs are a type of SBIC, so they are often referred to simply as SBICs.
SBICs are licensed and funded through SBA and funded through private sources to provide
money to small businesses. Typical private money sources include venture capital firms and
business "angel" investors. An angel is a wealthy investor who offers financing to private
companies in the angel's area of experience and knowledge.

20.  Small Multi Family

21.  Super Fast Multi Family
This list gives you lenders approved by the Department of Housing and Urban Development
(HUD) to make multifamily mortgage loans quickly and with less red tape than using other
lenders. A star (*) next to the name indicates that the lender can also make loans for Nursing
Homes and Assisted Living Facilities.


22.  UNDERWRITERS UPDATE
SELECTED STOCK BROKERAGES WORKING WITH REITs AND
IPO's   WHAT DO THESE FIRl\IS DO?
The firms listed below are full-service stock brokerages which deal in REITs, IPOs and related
transactions. More information on each firm is available by telephone or by visiting their Web
sites. This information is provided below.
An individual may invest in a publicly traded stock offering, listed on a major stock exchange,
by purchasing shares through a stockbroker. As with other publicly traded securities, investors
may purchase common stock, preferred stock or debt securities.
An investor can enlist the services of a broker, investment advisor or financial planner to help
analyze his or her financial objectives. These professionals are able to recommend
appropriate investments for the investor.

23.  UNSECURED LINES OF CREDIT
USED CAREFULLY, AN UNSECURED LOC can help a business grow, provide much-needed working money, and help a company through tough times.
AN LOC IS NOT AN INVESTMENT OR A SALE OF A BUSINESS or stock of any kind. Federal laws about investing in stocks do not apply to LOC's. *
AN UNSECURED LOC IS CALLED UNSECURED because it is not backed by collateral .
Whether or not an unsecured line of credit can be gotten may depend partly on the credit history
of the business and its owners. If you look around, you can even fmd firms that offer unsecured
LOC's for businesses and people with bad credit.

24.  VENTURE CAPITAL & ANGELS

25.  BUY and REHAB APARTMENT BUILDINGS
The lenders listed below make loans for the purchase and rehabilitation of multi-unit (apartment) buildings.

26.  COMMERCIAL FUNDINGS FOR BUSINESS RE
Commercial loan: a short-term renewable loan, typically 90 days, used by a company to finance
immediate or seasonal working capital needs. Commercial loans are sometimes referred to as business
loans or bank loans. This document covers commercial lenders of various types. Note: Lenders are
listed by the types of loans they make; therefore, they may appear under multiple categories.
Forty kinds of commercial loans: There are at least 40 kinds of commercial loans. They include:
Commercial Real Estate Mortgage Loans
Conforming loans meet certain borrowing guidelines on amount, terms and other loan specifics,
established by Fannie Mae and Freddie Mac. Jumbo loans allow the borrower to borrow more than the
maximum loan amount established by Fannie Mae and Freddie Mac.
No-documentation, or no-doc, loans require less information from the borrower than other kinds of
mortgage loans. No-doc loans can help a borrower get financing when income, assets or other
information are hard to verify.
FHA loans generally have lower down payment requirements and are easier to qualify for than other
conventional loans. FHA loans cannot exceed certain limits.
VA loans are guaranteed loans that help veterans to more easily obtain home loans with good terms,
often with no down payment.
RHS loans are guaranteed loans for rural individuals, with minimal closing costs and no down payment.
Additional, detailed types of commercial loans include:
Accounts Receivable
Bridge Loans with Warrants
Communications Lending
Construction
Contract Finance
Corporate Restructuring
Corporate Working Capital
Financing
Cross Border Financing
DIP Financing
Factoring
Floor Plan Financing
Government Guaranteed Loans
Healthcare
Import-Export Financing
Industrial Sales Financing
Intermediate Term Lending
Inventory
Investor Paper
Invoices to U.S. Agencies
Leasing
Leveraged Buyouts
Limited Pre-Invoice Funding on
Verified Government Contracts
Machinery and Equipment
Management Buyout (MBO)
Mezzanine Loans With Warrants
Monitoring Collateralized Loans
for Banks
Multi-Currency Transactions
Participations
Purchase Order Financing
Real Estate
Recapitalizations
Rediscount
Refinancing
SBA Loans
Single Invoice Factoring
Subordinated Debt
Tax Exempt
Tender Offers
Vendor Finance Banking
Venture Banking

27.  CORP & SMALL BUSINESS CREDIT CARDS
HERE ARE DETAILS ON SEVERAL OF THE CREDIT CARDS that are most popular with
businesses in the United States. Each listing gives the company issuing the card (for example,
American Express), the card's main features and benefits, as well as information on annual fees,
interest rates, and balance transfer fees, where available.
Please note that this listing is provided for the convenience of IWS customers only. The inclusion of
any business in this list does not constitute or imply an endorsement of any kind by IWS Inc.
Credit card companies may change offers at any time without notice. Certain offers may be available
for a limited time only. All readers are urged to contact the credit card company for the latest
information and offers on the cards that interest them.


28.  Corporate Credit Cards
HERE ARE DETAILS ON SEVERAL OF THE CREDIT CARDS that are most popular with
businesses in the United States. Each listing gives the company issuing the card (for example,
American Express), the card's main features and benefits, as well as information on annual fees,
interest rates, and balance transfer fees, where available.
Credit card companies may change offers at any time without notice. Certain offers may be available
for a limited time only. All readers are urged to contact the credit card company for the latest
information and offers on the cards that interest them.


29.  CREDIT UNIONS
A CREDIT UNION is a non-profit financial institution that is owned and operated by its
members. Credit unions make most of the same types of loans that banks and savings and loans
make-personal loans, mortgage loans, home equity loans, lines of credit and so on. Credit
unions generally have many "perks" for their members and charge their members less interest
than other lenders do.

30.  Directory Of US Angel Groups

31. Active Venture Capital and Business Angels That can help you Now

32. SBA MICROLOAN INTERMEDIARIES
An intermediary is a lender that helps borrowers get loans from other lenders and the U.S. Small
Business Administration (SBA). These lenders make micro loans, which are small loans to small
businesses needing startup funds, money for expansion, emergency cash, and other important
needs.

33. Yachts & Boats New & Used

34  Entertainment Funding
ENTERTAINMENT LENDERS AND FUNDERS
IN THE UNITED STATES, CANADA AND EUROPE
• Organizations Providing Financial Support for Entertainment Uses
• Public Funding for Film/Audio visual Production and Distribution
• Internet Links to Institutions in the Audio visual Entertainment Industries
Entertainment financing-and film financing, in particular-is typically available
in two forms: industry financing and lender financing.
Lender financing involves traditional lenders such as banks, commercial finance companies and the like.
Industry financing is provided by companies or individuals within the entertainment industry itself. 
Types of entertainment loans include loans for film, musical performances, theater,
performance art, magicians, television, sports, speakers, and many other purposes.

       
   
   

Direct Public Offering - A Viable Financing Option For Small Businesses

In 1997 a total of 185 companies filed 358 direct public offerings, an increase of almost 40% over 1995, according to the SCOR Report, a Dallas-based newsletter. California companies ranked fourth in the nation for SCOR offerings, with 19 filings. For '98. 

Companies willing to file certain disclosure information with the Securities and Exchange Commission (SEC) may raise up to $5,000,000 in any 12-month period under a Regulation A SCOR offering. Regulation A allows companies to "test the waters" or solicit indications of interest in ten states in order to determine potential investor interest prior to incurring the cost of drafting a SCOR registration statement. Accounting and legal fees to draft such a statement are normally around $50,000 for most companies.

A company must "Blue Sky" in each state it intends to sell securities. The Blue Sky laws are designed to protect investors and ensure complete disclosure of material information on the company. Companies need to be aware that there are widespread differences among the states' Blue Sky laws, with some states imposing much more stringent conditions than others. For example, the California Commissioner of Corporations imposes burdensome qualification
procedures. Under the present process, commonly referred to as "merit review," the California Commissioner's staff determines whether each SCOR offering is "fair, just, and equitable" to investors. A pending bill, Senate Bill 1205, sponsored by the Department of Corporations, would change the current merit review to one based on disclosure - the standard in most states. The Bill, still in committee, is not expected to be voted on until this summer, according to Blake Campbell of the Department of Corporations. A California company is not precluded from registering its SCOR offering in other states, even if it opts not to Blue Sky in California. Since the Blue Sky process can be lengthy and expensive, it is more cost-effective for a company to target the states where it has strong investor interest.


One of the major benefits of a SCOR offering is the securities are freely-tradable stock, although much of it remains illiquid for lack of a secondary marketplace. There are, however, some organized marketplaces such as the Pacific Stock Exchange which lists SCOR offerings; provided the issuer is able to meet certain listing criteria (age of business, net worth, etc.). opon approval by NASDAQ, the Electronic Bulletin Board will list SCOR offerings;
provided a market-maker agrees to file on behalf of a company certain disclosure information on a Form 211 (audited financials, issuer and security information, etc.).

Cost savings is another major DPO benefit. Generally, Direct Public Offerings are less costly then Initial Public Offerings (IPOs). Companies that decide to sell their offering without the benefit of brokers will also save on commission fees.

 

As attractive as DPOs may appear, not all companies are suitable candidates. In fact, only 30% of the DPOs were successful last year, which is up from a success rate of only 20% three years ago. In comparison, the major stock exchanges and NASDAQ had a total of 755 IPOs last year, with only 38 of such offerings withdrawn or postponed, according to Securities Data Company, a New York company that compiles securities data.

The best candidates for a DPO are companies seeking expansion capital. Start-up companies and those seeking capital for initial research and development will have a much harder time enticing investors.

Before jumping into the DPO marketplace, a company should ask itself the following questions:

  • Is management ready to take the time and effort required to prepare a SCOR offering?
  • Does your company have an affinity group which can be targeted for sales of your securities?
  • Who will conduct research to determine this affinity group and the location of these potential investors?
  • Who will conduct follow-up to initial leads and close the sales?
  • Does your company have name recognition or sizzle that will help sell the offering?
  • Is your company willing to develop and pay for a marketing program to sell the offering?

The Securities and Exchange Commission (SEC) has introduced provisions which drastically reduce the cost and complexity for a small business seeking public funds. These provisions are designed to allow a self reliant business owner to complete with only minor assistance from their current lawyer and accountant. GOING ïPUBLIC' will give your investors a tradeable security which goes a long way toward establishing an exit strategy for them. These programs are referred to as DIRECT OFFERINGS and, in some cases, are administered by your State Security Board. Call them for information.

One of these Direct Offerings, SCOR (Small Corporate Offering Registration) has developed a lot of interest and activity around the country to offer SCOR investors liquidity for their investments. The SCOR Task Force has held a number of seminars and is part of the Austin, Texas, Chamber of Commerce.

SCOR can be used at any stage of development from start-up onwards.

 

What is SCOR?

SCOR (Small Corporate Offering Registration) is a do-much-of-it-yourself securities registration document ("prospectus") in the form of a 50-question form designed so that knowledgeable business people, their attorneys and accountants can create the documents needed to sell state-registered securities to the general public--a direct public offering.

SCOR gives small businesses access to public capital by making the process affordable. It is up to them to seize that opportunity, and to make something of it. Selling debt or equity securities (common or preferred stock, bonds, promissory notes, etc.) directly to the public, (that is, without having to pass muster with the Securities and Exchange Commission and stock exchanges such as the New York, American, or NASDAQ the national market, or even regional exchanges such as the Boston, Philadelphia, Chicago, or Pacific) is an option every small business--start-up, developing, or going concern--should consider.

More than 700 companies have attempted to register almost $1 billion in equity and more than $100 million in debt using this process. While not all have succeeded, many have. Several companies have used direct public offerings (DPO) to move their businesses from their garages onto national or regional exchanges.

SCOR is an Important Part of the DPO Process

Small companies have been able to sell securities directly to the public without having to go through the expense of a full SEC registration since 1982. However, it was not until 1989 when the North American Securities Administrators Association adopted the Small Corporate Offering Registration form, that the process of state registration became truly practical.

SCOR refers to both a public offering of $1 million or less and the form used as the offering document (prospectus). Companies seeking to raise up to $1 million in a 12-month period must register the securities only in the states in which they intend to sell them.

Who can use the SCOR form?

While the federal exemption is very broad, there are additional limitations on who can use the SCOR Form. Generally, the form may be used by all small corporations except: Blank check and blind pool companies (companies that have no specific purpose for the funds they are trying to raise); Companies involved in extractive industries, such as oil and gas, and mining companies; Reporting companies (companies required to make regular reports such as 10-K and 10-Q to the Securities and Exchange Commission); and Investment companies. Other than those, the form has been used by high tech, low tech, real estate, lifestyle, manufacturing, merchandising and financial companies at stages of development.

 

What does it cost?

Depending on the knowledge and patience of the company's management, a DPO can be prepared and registered for a few thousand dollars if management can do most of the work itself. Accounting charges are usually the biggest factor in the cost of a SCOR offering. Most states require offerings of more than $500,000 to submit audited financials. Offers of less than $500,000 usually can submit reviewed financials. The accountant doing the financials has only to be an independent CPA.

If management is unwilling or unable to create the offering documents itself, costs go up appreciably. However, most states will not allow a company to spend more than between 15 and 20 percent of what it hopes to raise on raising the money. Most of the do-it-yourself offerings we have seen have cost between $7,300 and $39,000 including accountants, lawyers, printing, postage, phone calls, seminars and advertising. Some of those using packagers have cost more than $100,000.

 

SCOR - FAQ REVIEW

The SCOR Program signals a notable breakthrough in small business financing. Many state securities divisions have adopted a question and answer registration to enable corporations to raise up to One Million ($ 1,000,000) Dollars each twelve (12) months through the sale of its securities to the public. The "Merit" Standards used by the securities division to review registration in some states have been relaxed.

This action significantly reduces the overall cost and simplifies the raising of "seed Capital" for business start-ups, expansions and other allowable small business financing. Companies may use commissioned selling agents or sell the registered securities themselves through advertising, seminars or other approved means of mass solicitation. Investors are not limited as to their number or type, nor is there any restriction on the amount that may be sold to any one Investor.

All U. S. corporations may use SCOR to register securities for sale to the public except such companies as petroleum exploration and / or petroleum production concerns, those engaged in mining or other extractive industries or blind pool offerings . Securities may not be sold on behalf of any entity other than the issuing corporation.

However If the company, or any of the company's management or 10% or greater stockholders, have past or current regulatory problems or the company's securities are subject to registration with any governmental agency other than the SEC or a state regulator, then in most cases may not use SCOR.

The corporation may raise up to One Million ($ 1,000,000) each twelve (12) months. In calculating this limit, sales in all jurisdictions must be included together with any other securities sold under the SEC Rule 504 or section 3(b) of the Securities Act of 1933, or sold in violation of the registration provisions of federal securities law.

The offering price must be at least five ($ 5.00) dollars per share in most states, and the company may not split its stock or declare stock dividends for two (2) years following effectiveness of the registration, except with the permission of the Securities Administrator in connection with a subsequent registered public offering.

The securities registered and sold are "freely" transferable and tradable. You should note that because of the offering size and the five ($ 5.00) minimum price a public trading market is unlikely to arise. Note: The Pacific Stock Exchange received approval in May of 1995 from the SEC to list SCOR and Regulation. A securities, this should create a market for "Listed" SCOR and Regulation. A securities. Thus the SCOR offering is in nature an early stage venture financing, using public investors solicited by means of advertising and / or other general solicitation. If appropriate, the SCOR may be followed at some later stage by a "conventional" public offering that could result in the development of a publicly traded market. Depending on the state, SCOR may be used to register common or preferred stock, including convertible preferred and options, warrants or rights. Upon a showing that the company will be able to meet debt service, SCOR may be used to register debt securities, including convertible debt.

The offering may be sold directly by the company ( in some states the selling officer or director must be registered) or by a commissioned selling agent or finders. Mass solicitations may be used, including public meetings and advertisements (may need to be pre-approved by regulators in some states). Any type of investor may purchase any amount in the offering.

Proceeds of the offering must be placed in an escrow account with an independent bank or similar institution until the minimum amount necessary for the company to achieve its stated objectives is raised .(This is the min/max provision required by most states).

1. What is a SCOR LPO (Small Corporate Offering Registration, Limited Public Offering)?

A SCOR LPO is a vehicle that permits companies to raise up to $1 million in equity funds directly from the general public, e.g. , from their customer base or others with a keen interest in the product, services or management.

2. What type of company is suitable for a SCOR LPO?

A SCOR is suitable for companies that have a "growing" business, that have potential to be a profitable organization that sells a product or a service, and in which the shareholders will stand to make a return on their investment commensurate with the risk they are taking.

It is also possible to do a SCOR offering to fund an acquisition or a franchise operation.

3. What do the entrepreneur/ initial stockholders give up in return for the investors' money?

Investors receive common stock in the company. The value and percentage that they receive depends upon the value of the company at the time of the offering. More often than not, this will depend on the company's potential, its product line, investors' perception of the future, and management's ability to successfully lead the company to that future.

In most cases we expect the company will give up 35-55% of its stock. It is unlikely that your company is suitable for a SCOR offering if you will be required to give up in excess of 55% of the company's equity. The valuation is subject to "substantive fairness" review in many states and to negotiation with the Broker, if any, that will sell the security.


4. Does LPO mean the company is a publicly traded company?

No. It simply means that your stock is being offered directly to the public, however it is registered with the state or states that it is offered in and may be traded. If you wish to and you fit the requirements, you can have your company quoted on the SCOR Market Place of the Pacific Stock Exchange of on the NASDQ Electronic Bulletin Board. We do not recommend listing too quickly, on the PSE, but the objective should be taken into account from an early stage in order to ensure that the company builds the correct profile.

5. Who can the stock be offered to?

The stock may be offered to anyone in those states in which the offering has been registered (permitted) and approved. SCOR offerings are permitted to residents of more than 41 states, more States are joining, and most of those states require a merit review to test the offering's "fairness." You will find that one of your company partners, such as suppliers, distributors or customers will buy up all or a substantial part of the offering.

6. Who is authorized to sell the stock?

Licensed Broker/Dealers. Licensed directors and officers of the company are permitted to sell in some states (Series 63 exam, Uniform Securities Act).

We have an alliance with several Broker - Dealer Firms to handle the retail aspect of the SCOR offering. If Your Company qualifies we are able to provide you with a "Best Efforts" underwriting.

7. What is the difference between a private placement and a SCOR LPO?

There are two substantial differences between a private placement and a SCOR offering:

  1. A SCOR may be offered to and subscriptions accepted from any number of unaccredited or accredited investors . As for private placements in most states, the company is limited to just 10 offers /year, while some states permit subscriptions from 35 unaccredited investors and unlimited accredited (wealthy) investors.
  2. A SCOR offering may be advertised to the public and promoted by direct mail, Television, Radio, Internet, cold calling, public meetings and many other forms of promotion generally available.

Private placements, generally, may not be advertised in any way.

There is a much higher chance of funding your SCOR offering than funding a private placement.

8. Is there any guarantee of success that a SCOR offering will work for your company?

No. --- The success of the SCOR offering depends upon a number of factors including (not exhaustive)

  1. Your "story" to date.
  2. The product or service offered.
  3. The quality of the management team.
  4. The stock retail program, particularly
  5. The marketing and promotional activity that generates the initial interest.
  6. The quality and suitability of the prospect base.
  7. The ability of the broker to respond to questions and sell.
  8. The investors' perception of the risk factors. An investment decision in an early stage company is a high risk and a very personal decision.
  9. The amount of time and skill dedicated to "retailing" the stock and communicating with potential investors.

9. Is there a minimum or maximum that any one investor may invest?

There are no absolute rules. We will sometimes recommend a minimum investment of $500 but this may be considerably higher in cases where the prospect list is particularly affluent. In no case can you accept an investment from an investor if the investment's total loss would have a significant effect on his or her net worth.

10. Can the stock be sold to customers?

Certainly and in cases where the product is retailed, we recommend it. It can be a great marketing tool to sell more of your product or service. In some cases such as software companies, it can also be a great inducement to stop pirating. This is an excellent method of creating loyalty from your customers.

11. Does the offering have to be for $1 million? Can it be less or more?

The SCOR offering can be for less than $1 million but it cannot be for more, in most states. It is possible to make a second SCOR offering after a twelve month period for a further million dollars. After a period of six months (safe harbor), it may be possible to make non-SCOR offerings under certain circumstances. Note the SCOR offering cannot exceed $500,000 without audited financial statements.


12. When are the funds released to the company?

The funds are released to the company on breaking escrow if the company has established an escrow "minimum" level. Breaking escrow occurs when there are sufficient subscriptions paid in to have achieved the "minimum" amount of the offering that has been filed and approved by the various state merit reviews.

13. Whose and what laws govern SCOR offerings and who is exposed to liability?

Although the SEC (federal government) and most states made SCOR offerings more financially bearable on small companies, your directors, officers, and major shareholders could be open for civil or criminal penalties if the offering is carried out improperly. Even honest, accidental mistakes or omissions could require pay back of all moneys raised plus interest and attorneys' fees.

14. How much must the company invest in the offering before the proceeds are available?

This depends on the escrow level, if any, the speed of response of state administrators during the merit review period, and the time investors take to respond. As this number depends upon your company's product and the SCOR promotion, these costs will range between $25,000 and $50,000.

If you pay a securities firm to do everything.


15. Can the company fund its SCOR offering through bridge financing?

The offering can be funded by such methods as an SBA "LOW DOC" loan or raising the money by a "quick-fix" subscription offering or other alternatives. It is possible, depending upon the company, to complete a SCOR Offering with an initial investment of $2,000 on the part of the company. This is achieved by undertaking a quick fix bridge equity offering followed by a SCOR Offering.

16. What is the cost to the company if the offering is not a success?

The company must pay the professional registration fees, outside counsel, outside independent auditor, escrow fees, state filing fees, advertising & marketing fees, printing and postage. Selling commissions are paid only on moneys received by the company, No success, No fee.

17. How much does the company receive?

Net of all expenses, the company will receive on average a net of $800,000+/- if the offering is sold out at $1 million.

18. Is there any difference between existing stock and SCOR stock?

Usually. Existing stock is usually deemed "promoters stock or cheap stock" and there are restrictions on stock splits, dividends, and resale of the stock. The State or States in which the offering is registered generally requires that the promoters stock be escrowed for a period of three to eight years. The rules are different if the company is quoted on the SCOR Market Place of the Pacific Stock Exchange.

 


SCOR Filings and the States

The SCOR filing process and performance varies widely among the states. For example, almost 40% (190 of 476) of the approvals have occurred in just four states: Iowa, North Carolina, South Carolina, and Washington. About 55% (60 of 110) of the companies that have successfully raised money are from four states: Iowa, North Carolina, Mississippi, and Washington.

The activity of filings and approvals on a per capita basis varies widely from state to state. The top ten states have 30 to 100 times the activity of the lowest ranking states, such as Pennsylvania. This is a significant and important difference, as the performance of the top states results in many more public companies being created.

For example, if Pennsylvania matched the performance of the top states in the rate of approvals and therefore the number of companies successfully raising money, about 50 to 75 more public companies would have formed in the state over the past four years. In a region like the Pittsburgh area, this would have equated to about 15 new public firms, nearly double the number of public firms that were created in the region over the last four years.

SCOR Promotion

States also vary in regards to how proactive they are in promoting SCOR, educating businesses on its use, and holding pre-filing conferences or meetings to resolve problems before reaching a more formal, potentially adversarial approval process.

This proactive stance directed towards making SCOR work for the benefit of small companies correlates with high performance. Arizona, Iowa, South Carolina, and Washington are among the states cited as the most proactive. Iowa, South Carolina, and Washington rank in the top ten in SCOR approvals per capita, and Arizona ranks 17th; all have per capita approval rates that are four to 15 times the median rate among the states.

Pennsylvania ranks 38th in SCOR approvals on a per capita basis. Its rate of approvals is about one-fourth the median of all the states, and its approval rate is about one-sixtieth that of the top ten states.

Recommendations

Pennsylvania should strive to match the proactive efforts and performance of the best states by implementing the following five actions:

  1. Institute face-to-face pre-filing conferences for SCOR applicants. This resolves many informational problems that can turn more adversarial and bureaucratic in the formal review process.
  2. Create an educational campaign designed to educate Pennsylvania businessmen on the opportunities that SCOR filings can make available.
  3. Train many of those who deal with entrepreneurs within the state. Work with the existing entrepreneurial support infrastructure, including the Small Business Development Council, the Ben Franklin Technology Center, university-run entrepreneurial centers, and organizations such as the Enterprise Corporation, to encourage the use of SCOR offerings.
  4. Work to address the marketing problem faced by would-be SCOR filers through the creation of a centralized registry of approved SCOR filings within the state and other efforts to ease the difficulty in marketing these securities.
  5. Examine and reconsider all of the merit policies within the state as they pertain to SCOR filing approval. Merit policies may limit the offerings unnecessarily

 




The Regulatory Maze

If a small business sells securities, it must register them with the Securities Exchange Commission (SEC) at the federal level and with each of the states involved in the sale unless the issue is exempted. After the passage of the National Securities Markets Improvement Act of 1996 (NSMIA) relatively few offerings are subject to state review. NSMIA preempted states from reviewing securities listed on the major stock exchanges (New York Stock Exchange; the American Stock Exchange; the National Association of Securities Dealers Automated Quotation National Market System (NASDAQ/NMS); and others having similar listing standards). However, the effect of this act on small business capital formation has been marginal since most NSMIA exemptions benefit larger issuers. Most small issuers have to continue to deal with the various layers of securities regulations imposed by the states.       Registering with various states raises various problems. It can be very costly and complicated as each state has its own securities laws and regulations. There are costs without benefits in registering the same offering repeatedly. States’ provisions may conflict with some federal exemptions tailored to facilitate capital access to small businesses.      State securities regulatory structures are based on two approaches: “merit review” or “full disclosure.” California is a merit review state.
To be able to sell securities in California, issues must be “qualified” by the California Department of Corporations. This process of approval is described in Section 4.

In merit review states such as California, the regulatory agencies determine whether the securities issues are reasonable investments, based on a comparison of regulatory standards and the characteristics of the issue. Thus, getting approval in states with merit review systems can be quite complicated, as the state must find them suitable for investors. Under full disclosure, regulatory agencies simply make sure that investors have all the information to determine the merit and risks of an offering, letting them decide on the quality of the investments.

The federal securities regulatory agency (the Securities and Exchange Commission) is based on full disclosure. 
There are varying degrees of merit regulation, with some states applying stricter standards than others. Approximately 40 states have, to some degree, regulatory structures based on merit review. California and Texas have the most stringent merit review-based regulatory systems. Colorado, Delaware, New Jersey, Idaho, and Utah California Research Bureau, California State Library 3 primarily review for full disclosure, but apply merit standards only in specific areas.  Iowa, North Carolina, Pennsylvania, and Virginia describe their merit review system as limited merit review rather than full merit review. Other states (Connecticut, Georgia, Illinois, Maryland, Nevada, New Hampshire, Rhode Island, Wisconsin, and Wyoming) have a system based on full disclosure, similar to SEC’s review. New York goes even further, limiting its regulatory scheme to a prohibition on fraud, and emphasizing fraud prosecution.

Businesses, brokers, securities attorneys, and some regulators indicate that the merit states’ securities law and regulations are overly restrictive and costly to businesses, increase the cost of raising capital, and prevent the development of some innovative projects.
Costs are high due to fees, legal expenses business must pay to understand and comply with the regulations, and lost income due to delays in access to capital. There are also other costs to society such as the foregone benefits from profitable projects that are discouraged because of the difficulties of the merit review process.  Due to lack of data, there is no way to evaluate the exact economic costs from merit review and the severity of these costs to applicants.      

The Department of Corporations does not process all the information from the application forms. Therefore, detailed data on a company’s costs  of compliance and the economic characteristics of the applicants (type and size of business) are not readily available. But costs seem to be high enough to discourage broker-dealers and lawyers from filing for state reviews.   In surveys administered by the SEC, broker-dealers indicated that they sought to avoid state review and they limited underwriting activities  to offerings of securities that qualify for federal preemption.


*ULOR cannot be used for businesses engaged in petroleum exploration or production,
mining or other extractive industries, or “blind pool” offerings for which a business cannot be described.
*California is a "MERIT" State,  Nevada is a "FULL DISCLOSURE"  State

Section 4(2):
This section exempts issuer’s transactions that do not involve any public offering. A practical problem with the use of the Section 4(2) exemption is that the term “public offering” is not specifically defined by statute or rule. The Section 4(2) exemption has been interpreted in many SEC opinions and court decisions over the years.
Despite several court determinations, securities lawyers continue to be unsure about the exact use of this exemption. Companies prefer to take advantage of safe harbor exemptions as specified under Rules 504, 505, or 506 of Regulation D of the Securities Act, rather than rely on the broader terms of Section 4(2).23 Accredited Investor Exemption - Section 4(6):
Section 4(6) of the 1933 Act provides that the registration requirements shall not apply to private offerings to “accredited investors,” when the total offering price is less than $5 million. The definition of accredited investors is the same as defined in Regulation D, Rule 501. According to this definition, accredited investors are those who for the reason of their financial position, do not need the protection of the disclosure requirements under Regulation D. 

These investors include:

• Individuals who have a net worth exceeding $1 million, or income exceeding $200,000 (or $300,000 if married and filing a joint return) in each of the two most recent years and expect the same income level in the current year.
• Certain institutional investors such as banks, investment companies, and broker/dealers, trusts, and employee benefit plans.
• Charitable organizations, corporations or partnerships with assets exceeding $5 million.
• Businesses in which all the equity owners are accredited investors.
• Organizations with total assets exceeding $5 million.
• Directors and executive officers of the issuer.
The accredited investor exemption does not permit any form of advertising or public solicitation. Section 4(6) has not been used widely since private offerings to accredited investors are also exempted under Regulation D, a widely used exemption. 

Regulation D

To facilitate the use of the private offering exemption, the SEC adopted Regulation D in 1982. Regulation D is comprised of eight Rules, 501 through 508. Regulation D establishes three separate exemptions from Securities Act registration. (Rules 504, 505, and 506). Rule 506 establishes an exemption for private offerings under Section 4(2) of the Securities Act. Rules 504 and 505 are under Section 3(b) of the Securities Act that exempts small issue transactions. The other rules contain terms and conditions applicable to the exemptions. Rule 506
Rule 506 establishes an exemption for private offerings. This is a commonly used exemption for small businesses, particularly when only accredited investors are involved. It permits a private offering of an unlimited dollar amount to an unlimited number of accredited investors plus up to 35 non-accredited investors. Offerings involving non-accredited investors are much more complicated than offerings strictly to accredited investors.24 For example, it is up to the issuer to decide on what information to give accredited investors, as long as it does not violate the antifraud prohibitions. However, the issuer must give non-accredited investors disclosure documents that generally are the same as those used in registered offerings.25 In addition, the issuer must reasonably believe that those non-accredited investors have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. Privately placed securities issued under Rule 506 are “restricted.” In other words, after the offering, they may not be freely traded in the secondary market until the issue is registered, or unless the purchaser relies on a separate exemption. After three years, sales of restricted securities owned by investors generally may be resold if the following conditions are met:  
• The investor is not in a control relationship with the issuer (the security-holder is not a director, officer, or major owner of the company).
• The investor has held the shares for at least two years.

• The investor does not engage in a distribution of securities.26

To make use of Rule 506, the company must satisfy the following standards:
• File a Form D with the SEC. This is a simpler form than the ones used in S-1, SB-1, and SB-2 type of offerings. This form consists of a few pages asking basic identification company data and information about the offering. It requires information on the type of security and aggregate offering price offered in each state, the type of investors involved in the offering, the states involved in the offering, and the amounts purchased in each state. • Make no general solicitation or advertising to market the securities.27 A central problem that small businesses encounter with private offerings is how to reach a sufficient number of qualified investors without having a general solicitation.
• Exercise reasonable care to assure that investors are acquiring the securities for their own account.
• Make sure that the investors are accredited. Only 35 non-accredited investors are allowed.
• Provide required information to non-accredited investors (if any). 

NSMIA preempted securities sold under Rule 506 from state regulation. These offerings are subject only to the states’ right to impose notice-filing requirements and to charge the filing fees that were in effect one day before the enactment of the law.28 Most states have adopted notice and filing fee requirements for offerings under Rule 506. California requires notice of filing, but fees have been suspended until June 30 of the year 2000. During the 12 months ending January 31, 1999, the California Department of Corporations received 2,513 notices of Rule 506 filings.29
Small Issue Exemption
The Securities Act of 1933 authorizes the Commission to exempt transactions involving up to $5 million in aggregate offering price of securities (small issue exemption).30 In response, the SEC developed the following small issue exemptions: • Rules 504 and 505 of Regulation D
• Regulation A
• Rule 1001
Rule 504 of Regulation D: SCOR
Rule 504 exempts private and public offerings of securities of no more than $1 million of a qualified31 company during any 12-month period. This federal exemption is the basis for SCOR (Small Company Offering Registration). Rule 504 was intended to help small businesses willing to raise start-up capital in the range of $250,000 to $1 million. Some securities attorneys32 feel that the use of this rule is the least costly, most flexible way for a small company to carry out a small public stock offering. They see SCOR as a successful way to raise capital for small companies, despite the hurdles imposed by the regulatory systems in some states. However, others do not agree with this position since they see the states’ regulatory review process for this type of offering as quite demanding and time consuming, particularly for start-ups and companies at early stages of development.33 Although the use of this rule is an important source of seed capital for some small businesses, the number of companies that use this exemption is small and it has been decreasing over time. 
Rule 504 requires that these securities sales be registered under a state’s securities law. In this way, the SEC has left the regulation of offers of $1 million or less up to the states. Rule 504 is not usually used for a private offering because the issuer frequently prefers to use Rule 506, or the less used intrastate exemption.  To make use of Rule 504, a filing of the federal Form D with the SEC is required at the federal level. A copy of the Form D must be sent to the states involved in the offerings and  sales of securities. SCOR offerings have become easier to do in recent years, since the adoption of the North American Securities Administrators Association (NASAA) uniform procedures by a variety of states.34 NASAA designed these procedures to broaden the market for these types of offerings in multiple states by decreasing the cost or time to prepare the required documentation demanded by the various states’ regulatory agencies.  The disclosure document on Form U-7, developed by NASAA, constitutes the offering circular or prospectus. Once the states approve the offering, the company may use copies of this form to meet disclosure requirements to potential investors. Form U-7 includes a set of questions related to the company, risk factors, offering price factors, use of proceeds, capitalization, plan of distribution of securities, and financial statements. In addition to its use for SCOR offerings, this form is the general document for corporations registering under state laws securities that are exempt from SEC registration under Regulation A (an exemption discussed later in this section) or Rule 147 of the Securities Act. This form was reviewed in September 1999. The new form has more than 118 questions, but is a better disclosure form.
NASAA has also developed a regional review system to facilitate the process of clearing (obtaining approval for the offering and sales of securities) with multiple states. Under this system, some states allow the sales within their borders once a SCOR state has approved the deal.
                                                                                                                                                      

 
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