Welcome back to the final installment of my 3 part series on Non-public Lending. Let us assume that after hearing your stellar business plan, your private lender has now agreed to come on board. Did you follow SEC rules prior to searching out this lender? Did you follow the guidelines published in articles 1 and 2 of this series? You have to make sure that every single step is in accordance with SEC laws. Any misstep could possibly cost (and your business) dearly.
As said the SEC has many rules that rule non-public lending. I have selected some of the most imperative ones and listed them below:
1) A promissory note is a security - which therefore demands that you be a stocks broker to solicit personal lenders.
2) If you'd like to publicize to banks, you better be registered with your states SEC.
3) Don't pay referral charges or commissions to find non-public lenders unless it is to a licensed broker.
4) Never use the word "guarantee" in your advertising.
5) Ensure that each lender gets a copy of your discovery document.
I'd like to pay special attention to Rule 5.
Once your bank agrees to come on board, the number one thing you hand them is a disclosure document. Therefore what's a declaration document? Let's start by making this clear - This is a not an option item, it is an convincing MUST.
If you're ever asked by the SEC to show them your notification document, you had better be well placed to produce one, and prove that every bank got a copy of it. If you do not have one, you want to form one immediately. Simply to be on the safe side, run it by a SEC attorney to make certain it's up to par.
Why is this disclosure document so vital?
Well, all investments are risky, and you need to be bound to completely communicate that to your licensed money lender thru your disclosure document. If your private lender isn't given enough notification and suffers a loss, he could have a claim against you and your business. The information you give non-public banks must be all-encompassing, detailed, and correct. It is therefore crucial to follow the SEC's notification rules in your document.
What are some items to incorporate?
* Your BP
* Risk Factors
* Use of Proceeds
* Key Personnel and Investor information
* Your Company Financial Statements
Some further points...
Your declaration document is where you can give people access to information regarding your business. If you're new to this business, give folks some conservative projections of what you hope to do with the business in times to come. Remember - it's good business to under-promise and over-deliver. An understated, factual disclosure document can deliver a forceful message to non-public banks.
Also , avoid obscure language and technical terms, and provide definitions for terms that may not be easily understood. Be easy and straight to the point. Your objective is not to puzzle the non-public bank.
The final analysis is this - by giving your bank a disclosure document, it will show them precisely what to expect from their investment, which should lessen some of their fears.
Now its time to beat your fears of rejection, or what I love to call - "approach anxiety". Go out and introduce yourself to potential private lenders. Just be certain to stick to SEC suggestions. Remember, finding and partnering with a solid personal lender can be incredibly simple - and should be the key to your money liberty.
As said the SEC has many rules that rule non-public lending. I have selected some of the most imperative ones and listed them below:
1) A promissory note is a security - which therefore demands that you be a stocks broker to solicit personal lenders.
2) If you'd like to publicize to banks, you better be registered with your states SEC.
3) Don't pay referral charges or commissions to find non-public lenders unless it is to a licensed broker.
4) Never use the word "guarantee" in your advertising.
5) Ensure that each lender gets a copy of your discovery document.
I'd like to pay special attention to Rule 5.
Once your bank agrees to come on board, the number one thing you hand them is a disclosure document. Therefore what's a declaration document? Let's start by making this clear - This is a not an option item, it is an convincing MUST.
If you're ever asked by the SEC to show them your notification document, you had better be well placed to produce one, and prove that every bank got a copy of it. If you do not have one, you want to form one immediately. Simply to be on the safe side, run it by a SEC attorney to make certain it's up to par.
Why is this disclosure document so vital?
Well, all investments are risky, and you need to be bound to completely communicate that to your licensed money lender thru your disclosure document. If your private lender isn't given enough notification and suffers a loss, he could have a claim against you and your business. The information you give non-public banks must be all-encompassing, detailed, and correct. It is therefore crucial to follow the SEC's notification rules in your document.
What are some items to incorporate?
* Your BP
* Risk Factors
* Use of Proceeds
* Key Personnel and Investor information
* Your Company Financial Statements
Some further points...
Your declaration document is where you can give people access to information regarding your business. If you're new to this business, give folks some conservative projections of what you hope to do with the business in times to come. Remember - it's good business to under-promise and over-deliver. An understated, factual disclosure document can deliver a forceful message to non-public banks.
Also , avoid obscure language and technical terms, and provide definitions for terms that may not be easily understood. Be easy and straight to the point. Your objective is not to puzzle the non-public bank.
The final analysis is this - by giving your bank a disclosure document, it will show them precisely what to expect from their investment, which should lessen some of their fears.
Now its time to beat your fears of rejection, or what I love to call - "approach anxiety". Go out and introduce yourself to potential private lenders. Just be certain to stick to SEC suggestions. Remember, finding and partnering with a solid personal lender can be incredibly simple - and should be the key to your money liberty.
About the Author:
Robert Newton is a business writer focusing on finance and fast loans and has written prominent articles on the finance industry. He has done his masters in Business Administration and is currently assisting as a line of credit consultant.
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