Raising capital in the modern era has been transformed by programs like Regulation D 506(c), Regulation A+ and Regulation CF. We get many clients seeking advice regarding which type of security will suit their transaction best – equity or debt?

First and foremost – such decisions would be made as we on-board a client and begin working with them preparing the securities offering. In general, equity offerings work well in situations where the client specifically wants equity capital on the balance sheet and they are selling the “forward value” of the business. The majority of our transactional work for operating companies involves equity offerings as the pitch to investors in these offerings is the valuation increase of the business should operational expectations be met along with participation in any dividends.

Debt offerings tend to work well in situations where the business is profitable and the client is seeking short to medium term private debt but the pitch is not “participate in the forward value of the business” it is “financial stability to pay interest and repay loan principal”.

There are certainly various permutations of these structures such as convertible debt and convertible preferred equity. As always – you should obtain proper legal advice on these decisions as situations can vary regarding the proper structure for your raise.

Interested in raising capital for your company? Call us today to discuss! (720) 586-8610