Private Placement Investment Generalities
From a private investor’s point of view, a private placement investment refers to investing money in a small company’s shares by purchasing common or preferred stocks with the goal to help the business raise financial capital funds. From the company’s point of view, a private placement means the sale of stocks to a small number of private investors as a form of raising the money needed to help the business grow or expand. Investors involved in private placements are generally private ones, also called angel investors. Institutional investors such as large banks, mutual funds, insurance companies or pension funds can also be interested in a private placement investment.
A other goods of value with the expectation of future returns and a favorable business improvement. It has a general level or risk, depending on the company’s business plan and prospects, and it provides the opportunity of cashing in financial returns over a period of time.
The benefit of a private placement investment is that it can offer the entrepreneur a great method of financing his company. By finding the right investors, he can rise from thousands to millions of dollars in capital funds, while keeping control over his business without accumulating too much debt or losing control over the managerial board. Angel investors can offer a high level of security in owning the company’s shares and bonds, while seeking only a maximum of 30% investment return rate over a period of time of 5 to 10 years. For an entrepreneur, the overall cost of a private placement investment is lower than an initial public offering (IPO). A private placement has the benefit of allowing rapid money raising.
The perfect candidate for a private placement investment is a small business that is looking for expansion and growth funding. They can raise the money from individual investors earning $200k per year, households with an income of $300k per year or having a net worth over $1M or from large banks and other big institutions. The business owner needs a solid documentation to apply for a private placement investment. He must elaborate an accurate and doable business plan and a private placement memorandum (PPM) that discloses all the details of the investment.
Investors will always be interested in investing in private placement programs because small businesses create 70% of working jobs in the present economy. A private placement investment offers a viable method of financing a company, free from the constraints of taking it public and giving up managerial control and ownership.