Cohousing-L Mailing List: Re: Early financing, loans & the SEC

[Stuart Joseph (stuart]

IMHO, I* think the term "investors" might be misleading if it applies to 
someone from outside the group that lent them money. It would be best to 
call them lenders rather than investors.

If a person wants to make you a loan that is not the same thing as an 
investment as loans are expected to be paid back whereas investors are 
taking a risk of losing their investment by putting their money into a 
project that fails. If it succeeds, they get their money back and some 
type of return on their investment.

I really think that you are best talking to a lawyer- while it is great 
to ask for advice on the list and gathering information, sometimes an 
expert opinion is needed, most importantly when it comes to legal questions.

Setting up a co-housing project needs to be treated like a business and 
that means having a team of experts to help it along- not just 
architects and engineers, but a lawyer and accountant are just as 
important, if not more so since they can handle all of the legal and 
monetary issues that you need to comply with..

Tom Hammer wrote:
> Hi All,
>
> Many, many thanks to all who have given us their
> experience about how to work out your financial
> structure.  We've received two seemingly conflicting
> pieces of advice about loans.
>
> Do we risk running afoul of SEC regulations if we
> solicit or accept loans from investors who are not
> members of the group?  I understand several groups
> have done this.  I don't think it's a state specific
> question since the SEC is federal.
>
> >From what I read in Liz Walker's book,  EcoVillage at
> Ithaca had outside lenders, for example, and she
> doesn't mention any SEC red tape...
>
> Any advice or language of loan agreements you can give
> us would be extremely helpful.
>
> Tom Hammer
> for Concord Village
>
> ----------------------------------
>
>
> We did not have a cash-call system.  If we were going
> to hit a 
> period of exceptional expenses (much of which could be
> anticipated), we 
> solicited voluntary member-household contributions,
> which (unlike the 
> capital contributions) paid interest, and/or solicited
> outside lenders 
> and 
> investors (including some on this list -- Thanks
> again!!).
>
> Hope this helps.  All the best!
>
> Regards,
> David Heimann
> Jamaica Plain Cohousing
>
>
> Date: Wed, 22 Nov 2006 21:57:49 -0500
> From: Dave and Diane <daveanddee [at] verizon.net>
> Subject: Re: [C-L]_ Financial structure advice needed
> for forming
>         group
> To: cohousing-l [at] cohousing.org
> Message-ID:
> <6780710F-7A9E-11DB-BF21-0003936C420C [at] verizon.net>
> Content-Type: text/plain; charset=US-ASCII;
> format=flowed
>
> Hi everyone in coho-land!
> I just want to clarify one thing--we did NOT have
> investors. Anyone who 
> loaned us money had to either be an associate member
> or know a member 
> of the group well enough to give them a personal loan.
> When you have 
> investors it creates a whole new ball of wax and you
> have to create a 
> prospectus, submit an annual report, file with the
> SEC, etc. etc. etc. 
> etc. Trust me--you do NOT want to go there.
> --Diane(:^[
>
> marketing facilitator
> jp cohousing  617-522-2209
> Box 300420 boston ma
> http://www.jpcohousing.org
>
>
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>   

--
Stuart Joseph, 802-463-1954
Project Director
Caer Coburn, a traditional village based upon  and intentional communities
Rockingham, Vermont, USA
http://www.caercoburn.org