Private placement realities ? Critical issues you need to fully understand

Posted by Elite Internet Technologies on November 29th, 2016

There is a myth in their financial markets that private placement is some sort of cure all for capital management. Private placement can be a very good move indeed, but you really do need to know absolutely everything about what this process involves.

Typically, private placement is used to acquire capital on an equity basis. The basis of the private placement may be a separate class of stock, for example, or other clearly defined equity or capital rights.

Please be aware:

Private placement is not some sort of "ceremonial" or bureaucratic process. It relates to real property and rental equity in your company.

Major investors are famously intolerant of mistakes with private placements, with good reason. If you want to blow the whole deal instantly, make a mess of your private placement.

The market myth about private placements is that they are about simply getting money from a friend. Nothing could be further from the truth. An investor in a private placement is a part owner of your business with attached rights.

The bottom line with any private placement is that you are nailing your company to an equity arrangement, so don't get casual about it.

If you want feelgood information about equity deals, watch The Wolf of Wall Street again. If you want facts and hard information, talk to the experts.

To do a private placement properly in the US, you need:

A private placement agent, specifically a FINRA (Financial Industry Regulation Authority) authorized agent. Your private placement agent is your built-in expert and an excellent source of information regarding private placement options and equity management choices.

A clearly laid out and properly documented private placement arrangement. This is not an optional extra. Your documentation must be fully compliant, and 100% perfect. If it isn't, you can find yourself up a very well-known creek without a canoe.

For a good example of a US private placement company, visit Venture Associates at their website here at www.venturea.com . This website contains a lot of very useful information regarding the private placement process, and the company is an acknowledged market leader in this field.