b'5. Understand How Securities Laws Apply to YouAdvertising for Private Lenders is RegulatedThere is no consistency among state securities laws, so the only way to know if you can advertise for investors is to examine the securities laws in each state where you will make offers to private investors. You must do this before you start offering promissory notes to them in exchange for their dollars. Another approach is to follow the rules for a Regulation D, Rule 506 securities exemption (covered in a later chapter) and pre-empt state law requirements. Rarely is it a good idea to advertise for private lenders unless you are containing your entire business in one stateyour entire business being defined as you, the loan collateral, and the lender. A securities attorney in your state must confirm that the states law allows you to do so. California, for instance, has rigid securities laws that apply to private loans. They require your company to file disclosure notices, and to demonstrate what specific licenses or securities exemptions allow you to issue promissory notes to investors.Dont be in Denial About Securities LawsIn the U.S. there is a pervasive and incorrect belief that notes are not securities; that simply asking someones friends and family to loan you money is not subject to securities regulation. Many offenders are single-family fix-and-flippers who buy, rehab and sell single-family properties in their local communities and who regularly attend their REIA meetings looking for private lenders or JV partners. Such serial borrowers, whose business depends on repeatedly borrowing money from private investors, put themselves at risk of regulatory action. I have seen real estate investors in Colorado who have been investigated by the Colorado securities regulators for advertising for private lenders 39'