Welcome back to the final installment of my 3 part series on Non-public Lending. Let's assume that after hearing your stellar business plan, your personal lender has now agreed to come on board. Did you follow SEC regulations before seeking out this bank? Did you follow the guidelines outlined in articles 1 and 2 of this series? You need to ensure that every single step is in compliance with SEC regulations. Any misstep could most likely cost you (and your business) dearly.
As said the SEC has many rules that rule private lending. I have selected some of the most critical ones and listed them below:
1) A promissory note is a security - which so requires that you be a stocks broker to solicit private banks.
2) If you would like to advertise to banks, you better be registered with your states SEC.
3) Don't pay referral costs or commissions to find private lenders unless it is to a licensed broker.
4) Never use the word "guarantee" in your promotion.
5) Be sure that each bank gets a copy of your discovery document.
I'd like to pay particular attention to Rule 5.
Once your lender consents to come on board, the number one thing you hand them is a notification document. Hence what's a declaration document? Let's start by making this clear - This is a not a choice item, it is an absolute MUST.
If you are ever asked by the SEC to show them your discovery document, you had better be well placed to produce one, and prove that each lender got a copy of it. If you don't have one, you need to create one immediately. Just to be on the safe side, run it by a SEC attorney to make sure it's up to par.
Why is this notification document so important?
Well, all investments are dangerous, and you must be sure to fully communicate that to your licensed money lender via your declaration document. If your private lender isn't given enough declaration and suffers a loss, he could have a claim against you and your business. The data you give non-public lenders must be thorough, detailed, and accurate. It is therefore vital to follow the SEC's disclosure rules in your document.
What are some items to include?
* Your Company Plan
* Risk Factors
* Use of Proceeds
* Key Personnel and Investor info
* Your Company Financial Statements
Some extra points...
Your notification document is where you can give people access to information about your business. If you are new to this business, give people 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 discovery document can deliver a potent message to personal banks.
Additionally , avoid obscure lingo and technical terms, and provide definitions for terms that isn't be easily accepted. Be easy and to the point. Your objective is not to confuse the personal bank.
The bottom line is this - by giving your lender a disclosure document, it will show them exactly what can be expected from their investment, which should lessen some of their fears.
Now it's the time to overcome your fears of rejection, or what I like to call - "approach anxiety". Go out and introduce yourself to potential personal lenders. Just be certain to stick to SEC axioms. Remember, finding and partnering with a solid non-public bank can be very simple - and should be the key to your finance liberty.
As said the SEC has many rules that rule private lending. I have selected some of the most critical ones and listed them below:
1) A promissory note is a security - which so requires that you be a stocks broker to solicit private banks.
2) If you would like to advertise to banks, you better be registered with your states SEC.
3) Don't pay referral costs or commissions to find private lenders unless it is to a licensed broker.
4) Never use the word "guarantee" in your promotion.
5) Be sure that each bank gets a copy of your discovery document.
I'd like to pay particular attention to Rule 5.
Once your lender consents to come on board, the number one thing you hand them is a notification document. Hence what's a declaration document? Let's start by making this clear - This is a not a choice item, it is an absolute MUST.
If you are ever asked by the SEC to show them your discovery document, you had better be well placed to produce one, and prove that each lender got a copy of it. If you don't have one, you need to create one immediately. Just to be on the safe side, run it by a SEC attorney to make sure it's up to par.
Why is this notification document so important?
Well, all investments are dangerous, and you must be sure to fully communicate that to your licensed money lender via your declaration document. If your private lender isn't given enough declaration and suffers a loss, he could have a claim against you and your business. The data you give non-public lenders must be thorough, detailed, and accurate. It is therefore vital to follow the SEC's disclosure rules in your document.
What are some items to include?
* Your Company Plan
* Risk Factors
* Use of Proceeds
* Key Personnel and Investor info
* Your Company Financial Statements
Some extra points...
Your notification document is where you can give people access to information about your business. If you are new to this business, give people 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 discovery document can deliver a potent message to personal banks.
Additionally , avoid obscure lingo and technical terms, and provide definitions for terms that isn't be easily accepted. Be easy and to the point. Your objective is not to confuse the personal bank.
The bottom line is this - by giving your lender a disclosure document, it will show them exactly what can be expected from their investment, which should lessen some of their fears.
Now it's the time to overcome your fears of rejection, or what I like to call - "approach anxiety". Go out and introduce yourself to potential personal lenders. Just be certain to stick to SEC axioms. Remember, finding and partnering with a solid non-public bank can be very simple - and should be the key to your finance 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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