Private Placement Memorandum by Pitbull Mortgage School and Leonard Rosen
America's hard money expert explains the value of a private placement memorandum.
A private placement memorandum or commonly referred to a a PPM is a private offering to investors allowing a business to raise an unlimited amount of capital.
Many hard money lenders use this vehicle for the purpose of raising capital to loan on commercial and residential properties. The hard money lender becomes a portfolio manager utilizing an operating agreement with the investors. The portfolio manager receive the origination fees associated with the loan. In addition, the portfolio manager may receive a (ysl) yield spread. The portfolio manager also receives service fees for serving the fund and management fees. The function of the portfolio manager is to deliver the highest possible yield spread to the investors.
The most commonly used offerings are a Reg D 506 filing and a state registered offering.
A federal offering does not allow advertising to the general public. You can only talk about the investment to "known persons", meaning you have had a prior relationship with the potential investor.
A state registered offering functions in a different manner. A state offering allows you advertise in the state where the fund is registered. You can use mailing lists, newspaper advertising and the Internet.
You can only accept investment fro accredited investors who have their primary residence in the state which the fund is registered.
There are certain other benefits and restrictions, ask you attorney for details or contact Mr. Anthony Geraci, attorney at law at our office.
A private placement memorandum can be a powerful business platform.
There is no blanket answer on which offering is best for you.You should take in account your business goals, existing network, market conditions and your business plan.
For additional information on Private placement memorandums, please contact Leonard Rosen at 858 736 7788.
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