As a new or growing business seeking to raise capital from private investors, a private placement memorandum could be a crucial document for your company. This document offers a deep look at your business, serving the function of a private prospectus to a potential investor, like a bank, insurance company or individual.
What you will need for a private placement memorandum
Before you create a private placement memorandum (PPM), you will need a fully developed business plan. The PPM can supplement this plan and serve as the informational document with which you present your company to potential investors. A lawyer can help you draft this document.
What to include in the private placement memorandum
- All the pertinent details about your business. You should include what your company does and how it generates revenue.
- Everything investors need to know. What are the terms? How much money do you need, and what are the benefits if they choose to invest?
- What are the risks for the investor?
- Explain your management structure and introduce your team. Your investor should feel as though they’ve met everyone they are getting into business with. This will help build trust.
While there are no specific rules about formatting a PPM, there are numerous items necessary for inclusion in this document. It is vital that you carefully construct the PPM so that potential investors take you seriously as a candidate to receive their funds and as a potential partner in business.