Private Placements

PrivatePlacement.org can help you raise capital without the complexity and expense of SEC registration. Please read on to learn more about the private placements services we offer.

What is a private placement?

A private placement is the non-public sale of illiquid securities to qualified buyers. These securities are usually equity shares or debt instruments, are not publicly tradable, and are not registered with the Securities and Exchange Commission. One performs a private placement by filing SEC Form D with supporting materials.

How can you benefit from a private placement?

Private placements are a cost-effective way for small firms to receive funding without relying on an initial public offering. An equity or debt private placement is used to solicit capital from a limited number of qualified investors. Private placements are especially appropriate for a newly-established company. They are sought out by a wide group of investors and allow issuers to evade the high cost of a public offering. Another reason that private placements are quicker and cost less is that they do not require underwriters. Also, private placements may offer the only route for risky ventures or start-ups to access the capital market.

With a private placement, you can choose limit the investor pool to only those that have compatible goals. Happily, a private placement, unlike an IPO, does not force a company to relinquish its private status.

The end result: private placements are cheaper and easier than issuing publicly-traded securities.

How does a private placement operate?

The SEC's Regulation D (Reg D) spells out how securities can make use of certain "safe-harbor" exemptions to circumvent registration. Sections 504, 505, and 506 of Reg D contain the descriptions of these exemptions. These exemptions detail the rules for privately offering securities without registration via a Form D filing with the SEC. PrivatePlacement.org's skill in preparing Form D filings allows our clients to raise capital while avoiding the costly and time-consuming SEC registration process.

Are you qualified to make a private placement?

At PrivatePlacement.org, we carefully select the most appropriate exemption for your securities. To do so, we analyze all aspects of your firm and the current market environment. This is a summary of the Reg D exemptions allowed by the SEC:

  • Section 504: Known as the Small Corporate Offering Registration, or SCOR. SCOR offers an exemption to private firms that receive no more than $1 million of funding in any one year via the sale of securities. There are no restrictions as to the number or types of investors. Under this exemption, privately placed securities can trade publicly, although it is not available in Delaware, Florida, Hawaii, or Nebraska.
  • Section 505: Allows a small firm to offer up to $5 million in securities during a twelve-month period to an unlimited number of investors, with the restriction that no more than 35 of the investors are non-accredited. By definition, an accredited investor must possess enough assets or income to make such an investment. The SEC states that accredited individual investors must have either $1 million in assets or $200,000 in net annual income, while institutions must have assets of no less than $5 million. The securities exempted under Section 505 are not allowed to be publicly traded.
  • Section 506: Provides for a company to offer unlimited securities to any number of investors, as long as no more than 35 are non-accredited investors. Section 506 investors are required to be sophisticated market participants. Securities exempted under Section 506 may not be freely traded. Typically, real estate private placement deals are filed under Section 506.

How complicated is assembling the information necessary for a private placement filing?

Very! For example:

“The type and amount of financial and non-financial reporting necessary will vary according to the size of the offering. Different requirements are used for offerings up to $2 million, between $2 million and $7.5 million and above $7.5 million. Offerings of up to $2 million require disclosure of the type used by Item 310 of Regulation S-B. Offerings between $2 million and $7.5 million need distribution of the type of information required in Part I of Registration Form SB-2. If Form SB-2 is not allowed (e.g., if the issuer is a reporting company), the company must supply the kind of information "needed in Part I of a registration statement filed under the 33 Act on the form the issuer would be entitled to use." (For the majority of companies this is Registration Form S-1.) Companies offering more than $7.5 million worth of securities must provide information of the type detailed in Part I of a registration statement.”

Relax! PrivatePlacement.org understands this legalspeak. Our seasoned legal team knows all the filing requirements. Please be mindful that only qualified professionals can assure that a company's security sale will avoid significant jeopardy for the company and its management.

What does a Private Placement Memorandum contain?

A Private Placement Memorandum (PPM) is the primary component of an SEC Form D filing. It is a prospectus that provides vital information about the private securities to prospective investors, including the transaction terms, disposition of funds, company- and industry-based risks, and other important material.

The PPM is a detailed document composed of several technical sections. The following is a checklist of its contents:

  • Cover Page
  • Securities Legends
  • Suitability Standards for Investors
  • Summary of the Securities Offering
  • Capitalization of the Company
  • Risk Factors
  • Use of Proceeds from the Securities Offering
  • Dilution
  • Plan of Distribution of the Securities
  • Analysis of Financial Condition and Results of Operation
  • Selected Financial Data
  • The Business of the Company
  • Management and Compensation
  • Certain Transactions (transactions between the Company and its shareholders, officers, directors or affiliates)
  • Principal Shareholders
  • Terms of the Securities Offered
  • Description of Capital Stock of the Company
  • Tax Matters
  • Experts
  • Legal Matters
  • Documents Available for Inspection
  • Financial Statements
  • Projections
  • Exhibits

Too busy to be assembling all of this material? We understand! PrivatePlacement.org does all the tedious labor for you. Our extensive background creating and filing PPMs allows you to focus on your business rather than preparing paperwork.

What can PrivatePlacement.org do for you?

PrivatePlacement.org One Stop Shop Program offers a complete set of services to address all facets of your private placements requirements:

  1. We will consult with you regarding your financing objectives and advise you as to which alternatives are best. This is critical because many of our competitors adopt a "cookie-cutter" approach to Private Placement Memoranda, using a standard template that is most likely noncompliant with federal and/or state regulations. We create each offering based on your individual requirements, giving you a custom solution that complies with all pertinent legal statutes.
  2. Our group of specialists will optimize the structure of your private placement, gauging market demand, fees, liquidity, pricing, and risk sensitivity. We recommend the optimal mix of equity and debt obligations for your offering. We help you plan the terms, rates, and fees of debt offerings. The ensuing deal will maximize your return given current market conditions, and will meet investor risk/reward expectations. This is critical because issuers often return to the private placement market and need to maintain a reputation for fair dealing in order to successfully make another private sale.
  3. You will be introduced to a group of accredited potential investors including private investor groups, hedge funds, and prime brokers.
  4. We offer website development services to support the placement of your securities to a qualified investor community on the Internet.
  5. We create the Form D legal documents you require, and file them with the SEC. PrivatePlacement.org will complete and file the following documents:
    • Private Placement Memorandum – There are several different flavors of PPM. We always use Form 1A, which meets the highest standard of disclosure to the SEC. We also verify that all required exhibits are included, including contract obligations, financial statements, and other important information. For debt offerings, we also include data about the note structure and the promissory note provisions.
    • Subscription Agreement – a contract for the exchange of a explicit face value of securities at an explicit price. It includes an investor statement attesting to the receipt and review of the PPM, the risks assumed, and the investors' suitability.
    • Promissory Note Agreement – the terms of any debt offering.
    • Investor Questionnaires – data about the investor's background and business experience. The questionnaire indicates that the investor is qualified to buy the securities and has knowledge of the risks involved.
    • SEC Form D Federal Compliance Filing: – an 8-page SEC compliance filing, containing instructions for completing the filing, the filing schedule, and other required information.
  6. We handle any mandatory state filings, including state blue-sky filings (state statutes that specify how securities can be offered within the state). These statutes prohibit firms from selling securities unless the sale is registered with the state's securities commission or complies with one of the exemptions specified by the state's blue-sky statute. Issuers must ensure that the sale will be in compliance with the laws of the state in which the company is incorporated and in the states of residence for each investor. Failure to comply with state blue-sky laws can create a substantial penalty. PrivatePlacement.org makes sure that you have complied with all pertinent state laws.
  7. We offer the accounting, legal, and administrative services you will require. This gives smaller clients access to the same high-quality services available to larger issuers. An example: some privately-placed stock certificates need to be stamped with a legend that marks the stock as restricted. The legend informs the holder that the securities cannot be transferred unless there is an effective registration statement or an exemption from the registration requirements. The issuer instructs its transfer agent to not transfer the securities without the issuer's approval. After a specified time period, the securities become unrestricted, meaning that the certificates must have the legends removed and can be publicly traded. Tracking the status of security certificates and overseeing their proper labeling is one of the many services PrivatePlacement.org offers to private placement customers.

What if I want to privately place a real estate deal?

PrivatePlacement.org creates Real Estate PPMs under Regulation D Section 506. Any principal amount is allowed. This private placement vehicle is a capital pooling fund and allows investing in several projects simultaneously. Often, real estate professionals use Real Estate PPMs to procure equity funding and then use the additional balance sheet assets to secure real estate loans.

What should I do next?

Fill out the PrivatePlacement.org information form and we will get back to you right away. We are standing by to help you realize your capital formation objectives.

Get in touch with us for a free consultation