Suppose you own a small business and have utilized various funding sources to get it started, you may be looking to take your capital raise efforts to another level. Accredited investors may be the individuals you are looking for to help you reach your goals. Small businesses need all of the capital they can get, and those with accredited investor status can provide these businesses with much-needed financial support.
Some of the benefits of using accredited investors to propel your business forward include:
Giving You Exemption from SEC Registration
Accredited investors have the financial and/or other qualifications to participate in investments that are not accessible to the regular, non-accredited investor. These investors fulfill the criteria established by the Securities and Exchange Commission (SEC) that pertain to financial wealth and sophistication. Accredited investors are free to invest in private placements for small businesses and other opportunities.
Accredited investors can include individuals with a net worth greater than $1 million USD, entities such as corporations having assets greater than $5 million USD, and banks and charitable organizations having more than $5 million USD in assets. As an issuer, selling securities to those with accredited investor status, you are free from the SEC’s securities registration requirements per Rule 505 and Rule 506 of Regulation D.
They Possess Significant Resources to Invest
Accredited investors generally have significant wealth and assets to utilize in their investing decisions and activities. Therefore, by utilizing accredited investors for your business, you can access people with the resources to invest. Many individual accredited investors will have an annual income of over $200,000 USD as an individual (over $300,000 USD with a spouse) or a net worth totaling more than $1 million USD (not including the value of the primary residence). Some of these investors have worked with financial vehicles such as hedge funds and have significant experience investing in highly profitable opportunities.
You Have a Variety of Options to Choose From Among Accredited Investors
You have the option of choosing from a variety of accredited investors, including individuals, companies, and other organizations. Other than individuals who possess the income and net worth thresholds designated by the SEC and businesses which have equity owners that all qualify as accredited investors, there are other entities and groups that may be considered accredited investors. These include trusts with assets greater than $5 million USD or employee benefit plans with assets greater than $5 million USD, just to name a few.
The benefits of utilizing individuals or entities with accredited investor status are significant and can potentially help you take the next step toward reaching your business goals.
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