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Who Should Use a Regulation D Private Placement

Guest post by: Ken Hollowell

Article Overview: Most people do not know there are laws and regulations governing the raising of capital when equity is being provided.

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Who Should Use a Regulation D Private Placement

Any private company or entrepreneur that is seeking to raise equity capital or private debt financing from investors should have a securities offering in place. Only a securities offering can provide the needed practical framework to accommodate investment.

Even if your transaction will only involve one or two investors - you still need to provide the proper transaction framework, disclosure documentation and investment agreements necessary for raising capital. Raising capital from investors, debt or equity, of any amount requires very specific documentation that far surpasses what a business plan provides. It is imperative that a company seeking capital from investors have in place a Private Placement Memorandum, a Subscription Agreement, and in debt offerings a Promissory Note Agreement. Raising capital without these documents is nearly impossible - they are a necessity. You also need to use an SEC program, like Regulation D, to properly sell your company's securities to the investors. The SEC and States have specific rules concerning how a private company solicits capital from investors - even if very few investors are involved. The Regulation D Offering program is the exemption program designed by the SEC for private business. It is the most widely used program the SEC offers and provides the proper exemption needed to raise capital from investors. Not raising capital properly can provide investors with a "right of rescission" in the future - meaning they can get their investment back regardless of the circumstances. You could also face fines and other penalties resulting from an improper sale of securities to investors.

The Regulation D Offering Programs are typically utilized to raise from $25,000 to $50,000,000 in capital. Regulation D Offerings are used for a wide variety of transaction and industry types: corporate seed capital, corporate expansion capital, film production capital, real estate equity funding (acquisitions, development projects, golf courses, rehab), capitalization for early to pre-IPO stage Internet and technology companies, expansion funding for retail companies, and product development and distribution funding.

A Regulation D Offering provides the fundamentals for raising capital from investors - regardless of your industry type, age of your company, or the size of your organization.

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Home > Franchises > Ken Hollowell > Who Should Use a Regulation D Private Placement >
Article Tags: capital, funding, funding your company, ppm, private placement offering, raising capital

About the Author: Ken Hollowell
RSS for Ken's articles - Visit Ken's website

– Ken M. Hollowell, founder of both Prfran Consultants, Inc. and Profran Capital Group, Inc. and is a leader in the field of franchise development and non traditional methods of raising capital since 1980. Mr. Hollowell has lectured before many business organizations, Universities and Colleges on the subject of franchising and hosted a radio talk show of radio for years.

He conducts numerous seminars annually on franchise development and investing in a franchise business throughout the United States. He is regularly requested by the Small Business Administration in Washington, D.C., S.C.O.R.E., Learning Annex and the International Franchise Association to speak on franchising. Mr. Hollowell's well-rounded experience and practical knowledge in both development and marketing have led him to be one of the most sought after franchise consultants in America. Mr. Hollowell has written many articles on both developing a franchise network and buying a franchise. Mr. Hollowell sits on no less than a dozen boards of directors. Mr. Hollowell works with as many as 120 new clients each year on teaching techniques and methods of raising capital through the SEC's Reg D Series of Offerings


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Related Forum Posts
Any experience with McManus UK Ltd.? Any experience with McManus UK Ltd.? - Did anybody already deal with any of the McManus UK Ltd offshore entities? I do have a program, but not enough cash. I have been advised that they can fund investors with access to Private Placement Programs but they don’t want to joint venture with me. They want a fee for the service. This is why I want to find out if anybody has had first hand experience with this group? Patrick Ohara, Financial Consultant
How to valuate a business How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
Re: How to Get Your Business Funded Re: How to Get Your Business Funded - Check out fundsandloans.com they provide advice underwriting services, and business plan packaging for investment for final presentation to Private Investors
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