How private placement debt works
Private placements also offer the ability to structure a more focused and dynamic transaction. They attract a small number of sophisticated investors.
A private placement permits through 144A bond offering offers a more rapid penetration into the capital markets, than would a public offering of securities requiring registration with the SEC.
To find out whether it is a sensible financing strategy, you must have a fundamental understanding of federal and state securities laws affecting private placements.
You need to be familiar with the basic procedural steps that must be taken before pursuing this alternative form of financing.
Have a good sense of your list of targeted investors, and a team of qualified legal and accounting professionals to assist in preparing the private placement offering documents.
The private placement memorandum (PPM) is a document of securities offering that can also be used to seeking financing from family, friends, and angel investors.
It can be used as a funding strategy to open a retail shop or restaurant, or for starting a sophisticated technology or software company.
The PPM enables a business to target qualified institutional investors using a set of offering documents required under federal and state laws. The terms of the offering will be established by the borrower in advance.
A PRIVATE PLACEMENT MEMORANDUM offers
A higher degree of flexibility and ability to customize the transactional structure to meet the needs of the targeted investor.
The entrepreneur and advisors set and drive the terms (not the institutional investors or lender.
PPM investors are more patient and “vested” in your success than other types of investors.
Introduces entrepreneurs to the obligations and best practices in reporting to minority shareholders.
Speed of access to the capital markets.
WHAT IS A PRIVATE PLACEMENT MEMORANDUM?
A private placement memorandum (PPM) is a legal document that describes a company’s background, the risks to the investor, and the terms of the securities being sold.
The borrower has to determine the exact degree of disclosure, and factors affecting type and format of information to be included in the document.
It is critical to remember that a business plan is not a substitute for a Private Placement Memorandum (PPM).
PRIVATE PLACEMENT DEBT TERMS
- Loan amount: $1M to $500M+
- Loan term: up to 3 years
- Interest rate: 8 - 20%
- Loan to value: up to 75% and higher in some instances
- Underwriting criteria: normal requirements from a collateral lender
- Credit: single asset, bankruptcy remote entity
- Prepayment penalties: none after 6 months of timely payments
- Due diligence fee: varies but the lender or investor underwriting group will outline it in a formal letter of interest
- Points: 4 – 10
- Closing: ranges from 10 - 45 days or more
- Interest reserve: required
HOW CAN to ENSURE A SUCCESSFUL PPM OFFERING
Be ready and have a hit list; you certainly don’t want to take the time and expense to prepare a PPM and not have a clue who to show it to when it’s completed.
Prepare a list of targeted investors well in advance to make sure the offering is viable and to help your lawyers evaluate compliance issues.
Make sure the economic terms are attractive; remember that unlike a venture capital deal, in which the business plan is presented and then a term sheet is negotiated, the PPM offering is not intended to be negotiated at all.
You must have a good sense of the attractiveness and fairness of the terms of the offering in advance of distribution of the document.
Find special benefits or rights for the investors; for early-stage companies, the only real appeal to investors is the opportunity to get in on the ground floor of what might be the next big thing.
Your challenge is to find some special benefit or right to entice investors to invest in your business.
Do it right the first time; Investors don’t want to see a lot of waste, but they will expect to see a well-written and properly formatted document without typographical errors or poor grammar.
They will ask for exhibits and other information to help them understand the business and the risks inherent in the offering.
Friend of a friend; remember that the offering is supposed to be private, not public. It should be people with whom you and your team have a pre-existing relationship.
It should not be sent to a blind list of the wealthiest people in your area you know. Use your discretion and consult with an attorney if in doubt.
TYPES OF PROJECTS WE OFFER PRIVATE PLACEMENT FINANCING FOR includes;
Acquisition and development
myhelpfund.com © 2022 All rights reserved. Private Placement Debt
DISCLAIMER: Myhelpfund.com: is a referral and consulting services business. We are not Certified Financial Advisers, U. S. Securities Dealer, Stock Broker or Investment Adviser. We are not business consultants and acting in the capacity of a financial intermediary who provides advice to private individuals on or about business matters. .Please understand that the contemplated transaction(s) is strictly private and in no way relates to the United States securities act of 1933 **(THE”ACT”)* http://sblcfinancing.com/assets/sa33.pdf and does not involve the sale of registered securities. This transaction(s) are private and exempt from the act. Each investor associated in any way, directly or indirectly with myhelpfund.com as a potential funding resource must be an "Accredited Investor" as that term is used in federal and state securities laws. Myhelpfund.com provides a service through which clients and investors/lenders may identify each other but makes no actual or implied representations concerning the availability of any potential funding or funding resource. Myhelpfund.com neither effects nor attempts to affect any funding or business relationship between clients and any associated in any way, directly or indirectly investor or lender, and nothing contained in these services offering material should be construed as an offer to sell or the solicitation of an offer to purchase a security. Clients and Investors/Lenders associated in any way, directly or indirectly with myhelpfund.com are solely responsible for compliance of such federal, state, tax or local laws which may apply between them in any funding transaction and (clients) of myhelpfund.com are solely responsible to verify all funding contacts credentials by doing due diligence themselves. myhelpfund.com is not responsible for any problems or conflicts between clients of myhelpfund.com and any funding contacts. Myhelpfund.com does not provide legal, financial or tax advice of any kind. If you have any questions with respect to legal, financial or tax matters relevant to your interactions with myhelpfund.com funding contacts/clients, you should consult a professional adviser. Most early-stage businesses and many other growth-focused businesses fail, and if you invest in a business as a direct or indirect result of myhelpfund.com it is significantly more likely that you will lose all of your invested capital than you will see any return of capital or a profit. You should only invest in businesses that you can afford to lose without altering your standard of living. Myhelpfund.com receives compensation of fees charged on funding that has been accepted and received by the clients. All up front fees paid to our referral partners through their website or by other means are subject to their own terms and myhelpfund.com shall not be held liable for the same. All clients' information and funding transactions positive or negative are held in complete confidentiality and no information will ever be shared outside of our funding network or sold and no clients will ever be used as a reference or referral to any future potential funding seekers considering joining myhelpfund.com