After struggling with my finances for more time than most people realize is possible, I began thinking more seriously about what I could do to make things right. I began working hard to go through and identify challenges that I was faced with, including the fact that I had several kids that cost a lot of money. I began thinking of ways to work on saving cash, and it was really amazing to see how much of a difference something like skipping drinks with dinner and working on finding foods we could make at home could really be. I wanted to start a new website all about creating a more solid financial plan. Check out this blog.
Short On Cash And Long On Investor Names: How Private Placement Partnerships Work
You have a company. You want to invest more money to raise money to put back into your company to make it grow. There is just one problem; you do not want to take out loans and mortgages against your business and the banks will not give it to you anyway. What are you going to do? Who can you turn to? That is where private placement agents come in, and at another intersection, private placement broker dealers.
These finance wizards have connections, the kind of connections you want and need. They know people. They are the wheelers and dealers you have heard about and dream about meeting. Here is how your partnership with a private placement broker-dealer works.
Find a Placement Agent
First and foremost, you need to find a placement agent. Many of these professionals work for banks, stock exchanges, and/or investment and security companies. Then wheedle it down to those placement agents that are also brokers and dealers. A placement agent that is a broker brokers the contracts between you and the wealthy backers he/she knows. A placement agent who is also a dealer deals in securities so that he/she can take a cut along with the straight hourly rate of pay he/she charges. What you want is a placement agent with a fat rolodex of names of financial backers who privately provide the funds for you to invest and you provide some securities from your own company for the placement agent to sell or hold until an appointed time.
Meet with the "Angel Investors" That the Private Placement Agent Matches You With
The private placement agent has several "angel investors," wealthy investors whose only interest is in turning a profit by backing your fundraising campaign for your company. Most of the time, these investors have no interest in your company whatsoever, unless they see something in it that looks like it might either be incredibly lucrative in the future, or a whole lot of competition for them. Those two insights aside, the angel investors promise to put forward "x" amount of dollars for your needs.
They agree to meet with you to discuss terms. If you agree to the terms, you could receive money almost immediately. However, you should first meet with ALL of the names with which your private placement agent has matched you. There may be some better deals with fewer strings attached elsewhere.
The Private Placement Broker Brokers the Deals
You should never meet with the angel investors without the private placement broker dealer. He/she can help you broker a better deal with the angel investors. After all, the broker-dealer knows these people well and knows what kinds of deals the angel investors want to make. Once the really best deals are made, you sign the contractual agreements and wait for the checks to cash or the money transfers to clear.
You Invest the Money to Raise More Money
You invest the money you receive from the angel investors. You raise more money through careful investments. You give the promised cut back to angel investors, you pay your placement agent/broker/dealer what he/she wants, and the rest is yours to invest back into your company. Yes, it is a complicated process, but when you cannot raise any revenue any other way, and your company has not yet hit that sweet spot in success, this entire process is (or can be) a gold mine.
A Word of Caution
If it is debt you are trying to cover, this is not a good option. Most angel investors are smart business people that can smell a fishy deal. If your company is already flailing, they will find out, and they will not do business with you. The only time there is an exception is when your company is for sale, and a corporate buyout can prevent bankruptcy.