When Kevin McCarthy was hunting for money to launch a business, his Web search led him to a Wilmington based company and an offer that made him skeptical.

Regulation D Resources promised to lead him, at a bargain-basement price, through a process set up by the Securities and Exchange Commission to help small businesses raise capital.

Under the three Regulation D programs, entrepreneurs who meet SEC requirements are exempt from securities registration rules and able to enlist investors in an arrangement some liken to a private IPO.

"A law firm in Washington, D.C., had quoted me a fee of $25,000 to get the paperwork done. That would have taken all the capital I had," said Mr. McCarthy, of Orlando, Fla.

The price for the Regulation D Resources approach: $1,750.00

After doing some research and talking with Doug Ruark, a principal of Regulation D Resources, Mr. McCarthy signed up.

"It's been wonderful. I've been very satisfied," he said several weeks later as he prepared to submit notice to the SEC that he will be using the exemption to raise money. The author of a self-help book called The On-Purpose Person, Mr. McCarthy is starting a business to deliver information and planning materials aimed at helping college-bound and college-age students "make better decisions sooner."

Another satisfied customer further along in the process is Peter Gantner of Phoenix, Ariz., who is using the Regulation D exemption to raise money for a company he started last year. Itz Toys Inc. has a line of collectable toys called Flip-Itz, invented by two bored 8-year-olds playing a tiddlywinks-style game with the plastic spacers used in pizza delivery boxes.

"I knew nothing about Regulation D when I found his site," Mr. Gantner said. "I started calling around and talking to people. Like, 'What the heck is this Reg D thing? I need one.'"

He had circulated his business plan to venture capital funds with no luck. "Venture capital is like going and getting a root canal without any anesthesia, from my perspective," he said. "If you're not a technology company, it's almost not worth bothering to go to venture people - unless your best friend runs the fund."

Mr. Gantner signed up for Regulation D Resources after talking to more than a dozen other companies, most of which wanted $10,000 to do the paperwork. It took him about a day and a half to prepare the documents, he said, and they passed Arizona's required review with flying colors.

So far, he has raised $500,000 of the $5 million his company needs.

Mr. Ruark says Mr. Gantner's situation is fairly typical of his clients. Most have been turned down by venture capitalists, and few are familiar with Regulation D.

"The SEC doesn't do a very good job promoting it, so many entrepreneurs don't know about the program," he said. "Even some very savvy companies we work with didn't know the program existed."

Among the key advantages to Regulation D, he said, is the ability to accommodate "fractional" investment - a number of small investors rather than one large one to provide all the capital a company needs. It also provides what he calls an investment document - something a business plan alone doesn't.

Of the three types of exemptions, the most popular is the 504 program, which allows investment of up to $1 million during a 12-month period. The 505 program allows up to $5 million, and the 506 program has no cap. Rules covering the number and qualifications of investors vary with each.

The paperwork includes a notification to the SEC called Form D; a private placement memorandum, a document similar to a prospectus that includes necessary disclosures to potential investors; and compliance with "blue sky" laws in each state where the securities will be sold.

Mr. Ruark said his company's website, at www.regdresources.com, walks clients through the process, including guidance on the share structure needed to sell the desired percentage of the company and raise a certain amount of capital. The company also includes offering support and consultation to clients.

The website also contains links to brokers that specialize in selling Regulation D offerings in the same way publicly traded stocks are sold.

Trying to bring down the cost and "demystify" the use of Regulation D for entrepreneurs is a primary goal of Mr. Ruark's business.

What is Regulation D?

The Securities and Exchange Commission offers a program that enables private businesses to sell shares in a manner similar to that of larger, public companies.

Here are the advantages cited by Regulation D Resources:

• Companies do not have to complete a costly, full registration with the SEC.
• The exemption provides a legal framework for companies to sell debt or equity securities without going public.
• A Regulation D offering can accommodate a number of small investors.
• Securities can be sold through brokers who specialize in handling Regulation D offerings.
• Liability is limited because of detailed disclosures in a memorandum that accompanies the offering.
• The added documentation makes the proposal more marketable than a business plan alone.
• The process is quicker, less complex and cheaper than an IPO.