Why
You Need to Learn about Our Services?
Obtaining
Venture, or Private, Capital For Your Project
You’ve called every lender, mortgage broker,
and contact you can think of or can find on the net and absolutely no
one will give you the time of day! You and the client are both at your
wit’s end. Before dropping the deal, read this information closely.
A great many real estate deals, and other great business opportunities
that were on the verge of being abandoned, have been successfully financed
using a little known, but highly effective, strategy.
We have access to thousands of eager investors
looking for good opportunities! Many are tired of the 2% yields offered
on CDs and are not interested in the risks attached to the stock market.
When an opportunity to invest is offered that includes the proper structure
and documentation they are much more eager to respond.
Read this closely to see how you and your clients
will benefit from this great funding option!
The Advantages
of utilizing a Regulation D Private Placement Memorandum
There are many advantages to utilizing a Regulation
D Offering. The main advantages concern satisfying the legal issues
of raising capital from investors and providing a sophisticated and
professional means for investors to invest into your opportunity.
Remember - it is not the investor's responsibility
to figure out how to invest into your opportunity - it is your job to
provide them the efficient and legal means to do so.
Legal Issues
Satisfied. Any investor that invests capital
into your business, debt or equity, is going to get a security in return
for their investment. In an equity situation they will receive stock
or a membership unit, in a debt transaction they will receive a note
or "debenture". These are deemed "securities" by
the SEC and as such you are required to follow the rules and regulations
set forth at the State and Federal level when you sell a security to
an investor. This is true whether you need to raise $50,000 from 3 investors
for a coffee shop or $10,000,000 for a large development.
A Regulation
D Accomodates Many Investors: A Regulation
D Offering provides the fundamentals necessary for accommodating numerous
investors much more successfully and efficiently than utilizing only
a business plan. A business plan alone cannot provide the basic necessities
needed for raising capital from investors effectively. Business plans
typically confine businesses and entrepreneurs to locating one or two
"super-wealthy" individuals with the capability of investing
a substantial amount of capital. Even then - you still need to have
in place the appropriate disclosure documentation, transaction structure,
and investment documents to interact with those one or two investors
properly and allow them to invest.
Trying to find one big investor with the financial
capability to capitalize your entire transaction is like finding a needle
in a haystack. There are exponentially more investors available with
$5,000 to $25,000 to invest than super-wealthy investors with $500,000.
"Super-wealthy" investors are hard to access and, since they
are taking the majority if the risk by being the only investor, typically
demand a large amount of ownership and control for their investment.
As stated earlier - even with just one or two investors you still need
to have in place the legal capability to sell them securities, the appropriate
disclosure documentation, and proper investment documents for them to
sign outlining the terms and conditions of the investment. All things
a Regulation D Offering provides.
A Regulation D Offering provides the legal framework,
structure, and documentation that allows multiple individual investors
to participate in the investment opportunity. A Regulation D Offering
turns everyone into a potential investor. 99% of the private companies
that are successful at raising funding do so by pooling together the
investment of numerous smaller investors - only 1% raise the capital
they need through one investor or venture capital firm. How do you like
your odds?
Business Plans Are Very Limited. Lets make one
thing very clear - business plans are not investment documents. Raising
private capital (in any amount) properly goes well beyond the creation
of a business plan. A business plan just delivers an idea - it does
not actually provide the documentation or framework needed to raise
capital from an investor - nor can it legally.
Don't expect investors to give you capital based
on a handshake. For example - would you invest funds into a company
without signing a document that sets forth the terms and conditions
of the investment? The Subscription Agreement sets forth these terms
and conditions - this is the document the investor signs and gives you
with their investment check. You will have a very hard time raising
debt or equity capital without this basic document.
Ability
to Use Stock Brokers: A Regulation D Offering
enables the company to utilize a vast and effective network of sophisticated
and regulated funding resources unavailable to companies that just have
a business plan. Brokerage firms, fund managers, and individual stockbrokers
are all potential funding resources that can assist in selling a Regulation
D Offering. These are some of the most efficient and effective resources
for raising capital - they are in fact some of the same resources a
public company uses to raise capital from investors. When you consider
that a single stockbroker typically has access to dozens if not hundreds
of investors - it is easy to see why Regulation D Offerings can provide
a company with an inexhaustible resource for raising investor capital.
Hard Money Mortgages provides access to a large
number of brokerages that specialize in selling Regulation D securities
to investors. These highly sophisticated resources will not work with
a company that has not formulated a securities offering.
Internet
Marketing Potential: The advent of the
Internet has provided private companies with a powerful tool that allows
the capability to cost effectively introduce their opportunity to a
large number of potential investors. There are many web-based services
available that are specifically designed to promote private investment
opportunities. Internet marketing is a proven way to locate potential
investors.
You Have a “Structured Transaction”.
It order to raise capital properly it is crucial that you have a pre-set
transaction structure. What is transaction structure?
How much of the company are you selling for
the requested capital?
How are you raising capital - equity or debt?
If equity - what is being sold - stock, units, preferred or common?
What is the share structure of the company?
Do I as an investor face the risk of dilution in the future?
What is the available share capital of the company?
What is the minimum amount of capital the company needs to move forward?
In debt transactions - what is the annual rate of return, maturity
date, and note amount?
What is the minimum any one investor can invest?
In a Regulation D Offering the company dictates
the terms and conditions of the investment to the prospective investors.
This is important because you want to provide to investors a clear,
concise investment proposal with zero ambiguity.
Limited
Liability for Principals: When raising
capital from investors you are engaging in an act that can have very
serious implications. One of the benefits of an offering is the capability
to limit the liability of the principals or managers of the company.
The detailed disclosures in a Regulation D Offering
memorandum limit the liability of company principals by disclosing all
pertinent information to the investor before they make an investment
decision. Most business plans do not disclose the proper information
to properly inform investors of potential risks and key investment considerations.
If you have not provided proper disclosures to
an investor - and they become disenchanted with the investment or if
the company fails - the investor has the capability to cause problems
for principals due to their negligence in properly informing the investor
about the specifics of the investment transaction. Limit your liability
by raising capital using proper techniques and documents.
Individual Investors Are Better Than Venture
Capitalists. Many private companies waste time seeking funding from
venture capital groups. Less than 1% of companies that successfully
raise private capital do so through a venture capital firm. Do you think your
company will be one of the few in that one percentile?
Most private companies would not want true venture
capital in the first place. VC firms typically take a controlling interest
in your company and usually want to have a say in day-to-day management.
Most entrepreneurs are very hesitant to give up control of their business
to outsiders.
Proper Documentation:
Business plans are not investment documents. How can you expect an investor
to actually invest if you do not even provide them the basic documentation
to do so? Following is the documentation that is needed to properly
raise capital from investors:
Private
Placement Memorandum: The
Private Placement Memorandum, or "PPM", is the document that
discloses all pertinent information to the investors about the company,
proposed company operations, the transaction structure (whether you
are selling equity ownership or raising debt financing from the investors),
the terms of the investment (share price, note amounts, maturity dates,
etc.), risks the investors may face, etc. Do not confuse the detailed
disclosures and transaction structure in a PPM with the general information
a business plan provides - they are not the same.
Subscription
Agreement: Don't expect investors to give
you capital based on a handshake. Would you invest funds into a company
without signing a document that sets forth the terms and conditions
of the investment? The Subscription Agreement sets forth these terms
and conditions - this is the document the investor signs and gives you
with their investment check. You will have a very hard time raising
debt or equity capital without this basic document.
Promissory
Note: In debt offerings you need to have a Promissory Note outlining
the terms of the loan arrangement with the investors. The note is the
actual "loan agreement" between the company and the investor.
You can't have a business loan without a loan agreement.
Trying to raise debt or equity capital from any number of investors
without these documents is nearly impossible - they are a necessity.
A Regulation D Offering will dramatically increase
the sophistication of your transaction and your approach to soliciting
investors. Remember - you never get a second chance at a first impression.
Targeted
Marketing Resources and Tactics: Once you have the legal
and practical capability to raise capital from investors - the next
step is accessing potential investors for your company. We offer four
main forms of marketing assistance and investor resources:
1. Access to over 5300 NASD listed brokerage
firms representing thousands of clients that are potential investors
in Regulation D Offerings.
2. Access to Internet resources that specialize
in marketing offerings to investors via the Internet.
3. Guidance on creating a direct marketing
campaign designed to give your offering maximum exposure to interested
investors.
4. Direct access to Private Investor Groups
with over 5000 qualified individual investors.
5. A database of over 3,300 Capital and Private
Equity investment and lending firms. These are direct contacts...no
brokers, or intermediaries are included! This database includes investors
from the U.S. and Canada. 4500+ office addresses, 14,400 names of
decision makers, over 3,100 company and 9,000 key personnel email
address are in this one great database!
6. A searchable Internet database with over
900 private investor and investment groups!
7. Another Internet-based service is available
with over 28,000 private investors seeking good investment opportunities.
Frequently
Asked Questions Regarding Private Placement Memorandums
Is a Regulation
D Offering right for our company?
If your company is seeking equity capital or private debt financing
from $50,000 to $10,000,000 from individual investors - then you will
definitely benefit from the structure of a Regulation D Offering. From
simple deals like seed capital for opening a coffee shop to million
dollar raises for high growth companies - these programs will give you
the legal, practical method of raising capital from investors.
Do I really
need to do an offering?
Most private companies are capitalized by pooling together investment
from a multitude of private investors. The real key to being successful
at raising capital from investors is approaching them in a sophisticated
manner and providing for them the method of investing into the deal.
While you may think that you will be able to find a few very wealthy
investors you will actually have a much better statistical chance at
raising capital by being able to accommodate a larger number of smaller
investors. Super-wealthy angel investors can be hard to find - and even
if you do find them you need to approach them with sophistication.
What is
the success rate of the programs?
Because the Regulation D programs are government
programs they are open for use by nearly any private company that has
the practical or legal need to use them. Thus - you have companies with
good opportunities using the programs and companies with not-so-good
opportunities. A Regulation D offering is not going to change a bad
opportunity into a good one - but it will drastically enhance the capability
of good opportunities in effectively raising capital. In the end - whether
or not you raise capital is still going to be based on your core opportunity.
Doesn't my company have to go through an expensive
registration process with the Securities and Exchange Commission before
I can sell our company's stock?
Not with a Regulation D Offering. These offerings were designed to be
utilized by companies that needed to raise capital in amounts much smaller
than a traditional IPO (typical companies raise between $50,000 to $10,000,000
under Regulation D). The SEC only requires that an 8 page compliance
document (Form D) be filed and it is an "information only"
filing - not a filing that is subject to approvals or reviews.
What are
the related costs and fees to an offering?
The cost to engage Hard Money Mortgages is based
on the complexity of the offering. Most law firms charge anywhere from
$10,000 to $30,000 just to prepare the offering; no marketing or sales
consultation is ever offered by law firms. Submit a Preliminary Questionnaire
(click on the link above) and we will promptly provide a written proposal
including a quote on our fees usually $2500 - $5000.
The average commission offered to registered
brokers for selling the securities is 10% (which is added to the total
amount the company needs to equal the total offering amount - the commissions
are deducted from offering proceeds). Some states have a filing fee
to sell mortgages to investors residing in their state - these filing
fees are typically $50-$250.00 and are paid only if the company is going
to raise capital from investors in that state. There is no Federal filing
fee.
Do I have to personally guarantee the invested
capital?
No.
Qualifying
/ Company Structure Questions
My company
is a start-up with very little in assets - are there financial requirements
or minimum net worth requirements to use these programs?
No, not for the 504 and 506 programs. A substantial number of companies
that successfully use the Regulation D programs are recently formed
start-up companies or seed capital situations.
Can we use the programs to raise capital for
a real estate transaction?
Yes. Many real estate professionals and developers use the programs
to raise equity capital and then utilize the enhanced balance sheet
of the company post-offering to qualify for real estate loans.
Our company tried to get a business loan at
a local bank but they turned us down - does this hamper our ability
to successfully use these programs?
No, individuals who invest in Reg D offerings do so because they feel
the long term possibilities of the company are good and/or a profitable
exit strategy will develop - ie: the company will stabilize and seek
a conventional loan from a bank or other lending institution. They are
much less concerned about the traditional bank criteria for lending.
Banks are also notorious for not lending to early stage companies with
little operating history - the Regulation D programs are ideal for these
situations.
I don't have a good personal credit history
- is this a factor in using these programs?
No, personal credit history of the principals is not a factor and is
not disclosed to investors.
What is the best corporate type for an offering?
Can it be an "S" Corporation, Limited Liability Company "LLC",
or "C" Corporation? Which is best?
This depends on the type of transaction. S Corporations do not make
good choices for stock offerings simply because most States limit S
Corporations on the maximum number of shareholders that can be in the
company (usually 35-75). If the company is seeking a loan then this
may not be an issue.
Limited Liability Company "LLC" formats
are popular with companies that have one-off type deals (film deals,
real estate development, etc.) where there is a definitive end of the
transaction, and with companies that are going to remain private and
only need one or two rounds of funding.
Regulation
D Offering Process Questions
How complicated
is this process?
While some of the items discussed here may seem a little overwhelming
the process for preparing a Regulation D Offering is actually very straightforward.
We will do virtually everything for the client, including all filings, and
we include offering support and consulting at no extra charge.
Isn't structuring
a securities offering difficult?
The structure and marketing of a Regulation D offering is not difficult
provided you have the necessary support and resources. Our service provides
clients with every resource needed to prepare, file, and market an offering.
Our hands-on guidance and the offering support service make the process
very efficient and understandable to individuals with little or no experience
in securities.
How long
does it take to structure the offering memorandum and have the company
ready to market its stock to investors?
With close communication between Hard Money Mortgages and the client,
expect the offering memorandum to be completed within 10 - 15 business
days.
Regulation
D Offering Marketing Questions
How long
does it take to raise capital once we have completed the offering memorandum
and filed the Form D with the SEC?
This depends on how much time is devoted to marketing, the size of the
offering, and the quality of the company's concept - with an aggressive
marketing program the securities can typically be sold within 30-120
days.
How do you
market a Regulation D Offering?
Regulation D offerings are not necessarily marketed
differently than any other type of investment opportunity. Companies
that have Reg D's in place are better equipped to interact with
investors and accommodate their capital investment. The following are some key
marketing advantages to a Reg D offering:
Internet
Resources: The dawn of the Internet has
created some excellent venues by which entrepreneurs can market their
opportunities to investors. There are numerous "bulletin boards"
that cater to marketing deals to private investors. The companies that
have the most success with Internet based marketing resources are the
companies that have Reg D offerings in place. Most of the Internet resources
specialize in attracting investors with between $10,000 - $50,000 to
invest. Thus - it becomes critical for the company to approach these
investors in a sophisticated manner and to be able to practically and
legally accommodate their fractional investment.
Brokerage
Resources: Yes - brokerage firms can promote
Regulation D Offerings. The mortgage is offered through the brokerages
to investors just like an IPO is sold by a lead underwriter (like Lehman
Brothers). The brokerages provided in our service are all regional in
size and smaller and have the capability to promote offerings up to
about $10mm in size.
Sphere of
Influence Resources: Most
entrepreneurs and growth companies have a wealth of potential investors
all around them. The problem is that when these companies just use a
business plan to seek capital they get into a "one big investor"
mentality that blinds them to the potential resources in their midst.
Since a business plan cannot provide the practical, efficient, or legal
capability to raise capital from numerous investors these companies
typically miss out on excellent resources for capitalization. With a
Reg D offering everyone becomes a potential investor: customers, accountants,
lawyers, employees, trade groups, local stockbrokers, members of the
chamber of commerce, etc.
Questions
About Our Services
What services does Hard Money Mortgages provide?
Hard Money Mortgages provides customers with everything needed to structure
and prepare a Regulation D Offering. From the pre-offering structuring
support, through all documentation and filings, to blue sky assistance,
marketing resources, and our direct consulting to assure you are using
the programs effectively and efficiently. We do not, however, directly
participate in selling or promoting the offering unless we are specifically
contracted with to do so under separate agreement. Mortgage brokers/agents,
registered broker/dealers and principals from the company seeking financing
may constitute the “sales force”.
How much direct support do customers receive
with the service?
Hard Money Mortgages will provide as much support and consulting as
the customer needs. We are ready and willing to help customers with
whatever they need to properly configure and market their offering.
Are there any additional costs charged by Hard
Money Mortgages in addition to the initial fee?
No. Our service is to provide the complete Reg D memorandum and a complete
marketing support package. Our one-time fee is based on the complexity
of the transaction and no participation or performance fees are ever
charged unless the client wishes to use us to directly offer the PPM
to potential clients.
Submit a Preliminary Questionnaire (see the
link above) and you will promptly receive a written proposal from us
that includes a detailed description of our services and a precise quote
on the costs.
How do I,
as the broker or introducing party to the client, get paid?
All of the funds raised through a Reg D are
initially placed in a bank escrow designated by the client who is promoting
the Reg D offering. The broker or introducing party simply makes an
agreement with the client for their fee to be paid.
To Start
The Process:
Please fax, or email, an Executive Summary or
a Preliminary Questionnaire (found on this site) of your project to
Fax: (601) 649-7116. We will review the request
and call you to discuss the feasibility of utilizing a Reg D private
placement to provide funding for your project.
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