Raising Money: Private Placement
Monday November 17, 2003
With the limited infusion of capital into the stock market, the private investor market is an attractive alternative for investors and small business. Private placement offers a viable form of business financing without the constraints of taking a company public and conceding control.
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When raising capital with a PPM never contract with unlicensed money “finders” and agree to pay them a commission or other success-based compensation if they are successful in raising capital .State and Federal securities laws only allow licensed broker/dealers to raise capital on a commission or other success-based fee arrangements. All other must be paid a flat fee or paid on an hourly basis and their compensation cannot be contigent on successful funding. It must be paid in advance regardless of the outcome. Check with the SEC.
I know some people have successfully raised capital in violation of the security laws but that does not make it legal. It just means they did not get caught. Yet. Why do you think they have security laws?