Private lending rules.

[Reed Starkey]

I spoke with an attorney today (not an SEC attorney) and I want to see who can comment as to the truth of what was said.

She told me in the state of Michigan, I am allowed to raise up to $1,000,000 from residence of MI and only MI.  I can advertise to them, and do not need to know them.  If it goes over $1mm, or has one out of state investor it becomes federal, and different laws apply.  I would still fall under the same rules as I cannot promise certain returns etc. 

I try to read every post I can on private lending, and have never seen this mentioned.  Is it really this easy?  I don't mean to second guess an attorney, but I also don't want to go to jail either.

[Jeff S.]

I'm confused, @Reed Starkey. Are you asking about borrowing money, lending money, or pooling money? Your title refers to lending, but the comments from your attorney seem to address your state's rules for pooling.

You can generally borrow as much as you want from anyone you want without a pre-existing relationship. It's also generally legal to advertise that you want to borrow money, as long as you are clear it's for a loan. The same is usually true for lending, except state law will dictate licensing and advertising requirements. The SEC has nothing to do with any of this.

You'll normally want to discuss lending with an attorney who specializes in that and the best way to find one is to ask a hard money lender who they use. Lending attorneys can be  as rare as hens teeth. On the other hand, when you ask an attorney about "raising" money, this suggests pooling and a registration, which is why it seems your attorney gave you the info she did.

You might clarify your question. If it's specific to lending in Michigan, perhaps @Jeff Rabinowitz can answer.