Although interest rates are low and it would seem that banks have money to loan, many entrepreneurs and business owners are finding that is it very difficult to get the start up or working capital needed to get their new business idea off the ground.  Private Placements are a great way to bridge the gap between unrealistic requirements of conventional financing and the needs of budding entrepreneurs.  Based primarily on exemptions allowed for what are known as Reg D offerings, those who need to raise funds can bypass the expense and complexity of the registered securities markets and go directly to private investors they know, or are introduced to by friends and family.  Private Placements are growing in popularity as faith in the stock market dwindles and investors are looking for alternate places to put their money.

Private Placements must have an offering document called a Private Placement Memorandum, or PPM, that discloses all the relevant information necessary to make an informed business decision about the investment.  The Private Placement Memorandum describes the anticipated risks and rewards and the key players in the management structure as well as their background, experience and qualifications for the planned business.   It includes a business plan, a description of competitors and how to compete with them, and a pro-forma to project income, expense and cash flow over the first 2-5 years.

In addition to the Private Placement Memorandum, a subscription agreement is prepared as the signing document for investors who wish to invest in the Private Placement.   Federal and State laws require the filing of a Form D informational document in most cases.  Requirements under State laws vary and must be examined on a state by state basis, depending on where potential investor reside.

By definition, a Private Placement is not offered to the public or through mass media or electronic distribution.  Although Broker Dealers may be used and paid a commission, most Private Placements are offered and promoted only by the Executives or Key employees of the entity raising the funds.