In the current economic climate, bank financing can be difficult to obtain for even the most creditworthy borrower. Traditional lending sources for businesses have tightened the reins. Business owners may be tempted to turn to private lenders, which can allow their business to improve its overall financial situation, or to seize a business opportunity that would otherwise pass them by.


It seems simple: the company borrows the money, issues a promissory note, or notes evidencing the obligation to repay the private lender(s), and moves forward with the business. Unfortunately, things are not always as simple as they seem. Business owners should be aware that in many circumstances, issuing a promissory note to raise money may implicate Federal and State Securities Laws.

Promissory notes are securities by definition. Although not widely known, State Securities Laws and the Federal Securities Act of 1933 include a “Note” and “Evidence of Indebtedness” in their respective statutory definitions of a “Security.” However, that does not end the analysis.

The “Family” of Notes:

Federal Law expressly categorizes a Note arising out of a current transaction with a maturity at time of issuance not exceeding nine months as an “Exempt Security,” meaning that Federal Registration requirements will not apply.


However, under the controlling U.S. Supreme Court ruling (Reves v. Ernst & Young, 110 S.Ct. 945 (1990)), Federal Law also sets up a rebuttable presumption that a Promissory Note with a maturity greater than nine months IS a security (as the statute requires) UNLESS it resembles one of a “Family of Notes” generally not considered to be a security for Federal Law purposes. The Reves court found the following Family of Notes not to be securities, regardless of maturity:


  • Notes delivered in consumer financing.

  • Notes secured by a mortgage on a home.

  • Notes secured by a lien on a small business or some of its assets.

  • Notes relating to a “character” loan to a bank customer.

  • Notes that formalize an open-account indebtedness incurred in the ordinary course of business.

  • Short-term notes secured by an assignment of accounts receivable.

  • Notes given in connection with loans by a commercial bank to a business for current operations.


The court went on to hold that Notes that do not fit cleanly in one of those categories can be evaluated for family resemblance using the following factors, in no particular order of importance:

  1. Whether the borrower’s motivation is to raise money for general business use, and whether the lender’s motivation is to make a profit, including interest.

  2. Whether the borrower’s plan of distribution of the note(s) resembles the plan of distribution of a security.

  3. Whether the investing public reasonably expects that the note is a security.

  4. Whether there is a regulatory scheme that protects the investor other than the securities laws (e.g., notes subject to FDIC regulation).


Common Notes that fall into this category that STEVE MUEHLER - SECURITIES does Family of Notes Offerings for:

  • Owner Occupied Real Estate (must be for the owner or proposed owner of the Subject Property or a State Registered Mortgage Lender).

  • Non-Owner Occupied Real Estate

  • The Purchase or Refinance of Equipment:

    • Airplanes

    • Trains

    • Trucks

    • High Priced Equipment

    • Stock Portfolio Loans

To Retain and Engage STEVE MUEHLER - SECURITIES for a Private Note Offering:

Since 2017, we have prepared of Secured and Unsecure Note Offerings for companies. 


Service(s) to be Provided:

  • No SEC Registrations Required.

  • Drafting & Preparation of a State & Federal Securities Laws Compliant Note Offering.

    • Our Custom Notes Offering Preparation includes (but is not limited to):

      • Offering Structuring and Development of a Presentation Grade Notes Offering,

      • Federal & State Securities Laws Compliance Review, and

      • Access to our Broker-Dealer Network & International Institutional Investment Banking Network.

  • Steve Muehler LinkedIn
  • Steve Muehler Facebook
  • Steve Muehler Twitter
  • Steve Muehler Website
  • Steve Muehler Blog
1055 West 7th Street
Los Angeles, California 90017
Phone: (877) 259-8066

STEVE MUEHLER - SECURITIES provides no depository services and is not insured by the FDIC. STEVE MUEHLER - SECURITIES is an Investment Banking Industry Document Preparation Company and Capital Markets Advisor. STEVE MUEHLER - SECURITIES does not offer, and does not offer to provide any broker dealer or market maker services. STEVE MUEHLER - SECURITIES operates this website (referred to as the “Website”). By accessing this Website and any pages thereof, you agree to be bound by its Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. STEVE MUEHLER - SECURITIES does not provide financial planning services. STEVE MUEHLER - SECURITIES does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.

© 2019 - 2021 by Steve Muehler