Choosing Between 506(b) vs 506(c) for Debt Funds: Real Estate Syndication Compliance

Deciding between Rule 506(b) and Rule 506(c) under Regulation D is a fundamental step for fund managers launching a debt fund. Each exemption shapes how capital can be raised, who can be approached, and what compliance obligations must be met. Rule 506(b) is ideal for those with established relationships and allows inclusion of a limited number of non-accredited but sophisticated investors—making it more flexible in terms of verification, yet restrictive in how you market the offering. On the other hand, Rule 506(c) opens up the ability to publicly advertise, making it well-suited for those looking to scale quickly or reach beyond their current investor base, but it comes with strict accreditation verification requirements.

This content dives into how your business model, fundraising timeline, investor base, and marketing strategy should all influence which exemption to choose. Whether you're building a local fund through personal connections or scaling nationally through online platforms and events, understanding the trade-offs of 506(b) versus 506(c) ensures your offering remains compliant and effective. This strategic insight can help position your fund to raise capital more confidently and securely in today’s regulatory landscape.

Read more about Regulation D: https://www.moschettilaw.com/reg-d-rules/

Read more about real estate syndication: https://www.moschettilaw.com/real-estate-syndication/

Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, as well as private equity firms. Our attorney, Tilden Moschetti, is determined to keep the firm’s ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory churning out private placement memorandums or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers with Tilden Moschetti without making you book an official appointment or get passed along to associates or paralegals. We’ll work with your ambitions and overall vision to help you close the current deal and fill in that ‘missing’ piece – whatever you need – to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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