Why private placement financing is making a comeback
On the Money From the February 1, 2002 print edition One of the most straight-forward resources for obtaining capital for a small business is also one of the oldest: private placement financing. One example of private-placement financing is this true story: A fellow was enjoying a cigar at Churchill’s Lounge at the Brown Palace Hotel. Three gentlemen, also smoking cigars, were discussing the oil business. The first man, who was in a related business, overheard their conversation. He walked over to the group of three and said “Here’s what I’m up to,” so they reached in their pocket and handed him $200,000. He wrote them an IOU on a napkin. Simply put, private placement financing issues security directly to an investor and secures capital for the business owner without the banking industry’s intermediation. Though it’s not always as serendipitous as the Churchill’s Lounge example, private or informal investors are now, more than ever, searching for exceptional small business investment opportunities. Despite the sluggish economy, I’ve run into more people with “funds on...
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