By Robert Newton


Welcome back to the final installment of my 3 part series on Private Lending. Let us assume that after hearing your stellar business plan, your personal bank has now agreed to come on board. Did you follow SEC regulations before seeking out this lender? Did you follow the rules revealed in articles 1 and 2 of this series? You have to ensure that every single step is in compliance with SEC rules. Any misstep could most likely cost (and your business) dearly.

As mentioned the SEC has many rules that govern private lending. I've selected some of the most imperative ones and listed them below:

1) A promissory note is a security - which so demands that you be an instruments broker to solicit non-public lenders.

2) If you'd like to advertise to banks, you better be registered with your states SEC.

3) Don't pay referral charges or commissions to find private banks unless it is to an approved broker.

4) Never ever use the word "guarantee" in your marketing.

5) Make certain 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 first thing you hand them is a notification document. Hence what is a discovery document? Let's begin by making this clear - This is a not a choice item, it's an absolute MUST.

If you're ever asked by the SEC to show them your discovery document, you had better be well placed to produce one, and prove that every lender got a copy of it. If you do not have one, you need to make one right away. Just to be on the safe side, run it by a SEC solicitor to make certain it's up to scratch.

Why is this discovery document so critical?

Well, all investments are dodgy, and you must be certain to completely communicate that to your license moneylender thru your disclosure document. If your lender is not given adequate notification and suffers a loss, he could have a claim against you and your business. The info you give private lenders must be thorough, 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 Indicators

* Use of Proceeds

* Key Staff and Stockholder info

* Your Company Financial Statements

Some extra points...

Your declaration document is where you can give folks access to info 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 days to come. Remember - it's good business to under-promise and over-deliver. An understated, factual discovery document can deliver a powerful message to private banks.

Additionally , avoid obscure language and technical terms, and supply definitions for terms that may not be easily understood. Be easy and to the point. Your target is not to confuse the non-public bank.

The bottom line is this - by giving your bank a declaration document, it will show them exactly what can be expected from their investment, which will lessen some of their fears.

Now it's the time to overcome your fears of refusal, or what I like to call - "approach anxiety". Go out and introduce yourself to prospective non-public lenders. Just be sure to stick to SEC axioms. Remember, finding and partnering with a solid private bank can be very simple - and will be the key to your money liberty.




About the Author:



0 comments