What is a soft commitment, and when can you ask for one?

A soft commitment is the moment an investor tells you roughly how much they plan to put into a specific offering. You write down the amount and the date. That is all it is.

It is not a subscription, it is not a promise, and it is not money in the offering account. The investor can walk away, and so can you. People state intentions generously because saying a number costs nothing, so many soft commitments never become funded subscriptions.

That is why the useful habit is to keep three numbers apart: soft amounts, signed subscriptions and funded money. Treat only signed and funded subscriptions as raised. When you describe progress to investors or partners, call soft amounts what they are: non-binding.

Here is the part many raisers miss. Some exemptions let an issuer gauge interest before committing to an offering. Regulation A and Regulation Crowdfunding have formal "testing the waters" rules. Regulation D does not. There is no Reg D accommodation for sounding people out about a deal.

So a question like "if I had a deal like this, would you put money in?" is not automatically harmless. If it is tied to a specific property or offering, live or planned, it can work as an offer of that security. Whether a given conversation is an offer turns on the facts: what you said, who you said it to, and how specific it was.

Gauging interest in a specific deal from people you have no relationship with can be an offer. Under 506(b), that can also be general solicitation, which the exemption does not allow. Talking about who you are, how your firm invests and what the asset class involves, without pointing to a specific offering, is a different conversation. Your attorney can tell you where the line falls for your facts.

Under Rule 506(b), you generally discuss a specific offering only with people you, or someone acting for you, have a substantive relationship with, meaning one that began before the offering and in which you learned about the person's finances and sophistication. Someone you met after the offering started belongs to your next offering, not this one. A form fill, a social media connection or a business card is not a relationship.

Under Rule 506(c), you may talk about the offering publicly. Every investor must be accredited, and you must take reasonable steps to verify that before accepting their money. A soft commitment from a new contact is fine to record, but verification still has to be finished before any funds come in.

Timing matters too. If the offering documents are not ready, settle with your attorney how, or whether, you collect non-binding interest before you ask anyone for a number.

Do not accept money, binding commitments or "deposits" alongside a soft commitment. Funds come in only after the issuing entity exists, the offering documents are final, the investor has received them, and, for 506(c), verification is complete.

Money goes to an account in the issuer's name, or to escrow as the documents say, never to a personal account. If a wire arrives early, send it back and start again in the right order.

A soft commitment is a starting point, so treat it as one. Confirm the amount in plain words, ask when the investor expects to complete the subscription, and send the documents the same day. Ask who else will review the decision (a spouse, a CPA, an adviser) so nobody appears late.

If you agree to hold room for someone, make the hold real, short and non-binding on both sides, and say when it ends. When it ends, tell them honestly. Every statement about how full the raise is must be true on the day you make it. Calling soft amounts firm commitments or "raised" money overstates your momentum.

The issuer decides which exemption applies, with its securities attorney. Before you ask anyone for a number on a specific deal, talk to your own securities attorney about your exemption, your timing and how you will collect interest. This article is education, not legal advice. The rules discussed here: Rule 502(c) on general solicitation, https://www.law.cornell.edu/cfr/text/17/230.502, Rule 506, https://www.law.cornell.edu/cfr/text/17/230.506, and Rule 241, https://www.law.cornell.edu/cfr/text/17/230.241. SEC staff interpretations of the Securities Act rules are at https://www.sec.gov/rules-regulations/staff-guidance/compliance-disclosure-interpretations/securities-act-rules.