Wall Street Journal  Updated

Changes to Small Business Administration lending requirements intended to channel more credit to African-American borrowers and other minorities will be announced Tuesday, according to the paper. "Beginning July 1, lenders will no longer have to perform an analysis of cash flow or debt-service coverage on loans of $350,000 or less, provided business owners meet the agency's credit standards," the Journal reports. SBA administrator Maria Contreras-Sweet said the changes "will simplify and streamline the lending process, which will incentivize banks to do more small-dollar loans in order to get more loans into the hands of traditionally underserved entrepreneurs." The Securities and Exchange Commission has launched probes into a number of major "dark pools" — private electronic trading platforms that allow investors to anonymously buy and sell orders. "Investigators are exploring whether the trading systems are properly disclosing to clients how they operate, treating all investors fairly and protecting confidential client information, among other concerns," according to anonymice. The housing market will continue to be hobbled by the precarious financial circumstances of Americans in their 20s and early 30s, according to John Carney and Justin Lahart. "Banks will see tepid demand for mortgages" as younger Americans struggle with student loan debt, limited job opportunities and sluggish income growth, the authors write. They predict President Obama's decision to expand student loan debt relief will make only a modest dent in the problem. "Better help would come from a drastic recovery in employment and incomes that would allow them to put their costly educations to work," Carney and Lahart write.

Private Placement Memoranda of Companies

Offering Types - Debt or Equity

(PPM) (PPM)

An equity offering is where the subject company sells an ownership stake in the company to investors. Equity is usually preferred by early stage companies that need flexibility regarding capitalization. In an equity situation investors profit as the company profits since they are partial owners. This provides the advantage of not having a debt service payment draining revenue from the company in its early stages of growth. Most companies sell 10-30% of their company for a first round funding - obviously there are exceptions but this is the average. We recommend using either a "C" Corporation (where you would sell stock to investors) or a Limited Liability Corporation LLC (where you sell a membership unit to investors). Investors typically profit in two ways from an equity deal; via their proportionate "per share" percentage of company profit (called a dividend) and via the final sale of the security through an exit strategy (example: the company buying the securities back from the investors, the company and its issued and outstanding securities being bought out by another company, going public and selling on the open market, etc.)


A debt offering functions much like a private business loan where, the company sells a promissory note to investors. The note sets forth the terms and conditions of the loan arrangement between the company and the investor. Thus a note would provide a certain interest rate typically paid annually to investors with a maturity date that dictates when the principal is paid back in full to investors. The notes are sold in fractional amounts providing flexibility for accommodating investors - thus a typical debt offering for $100,000 would be the sale of 20 notes at $5,000 per note. An investor investing $10,000 would get two notes. If the interest rate was 12% then he would get $1,200 paid to him annually based on the $10,000 investment. If the maturity date was 36 months then at the end of the 36 months the company would pay back the $10,000 to the investor. Many early stage companies that lack the required equity or operating history for conventional bank financing will use private debt from investors for a short period of time (12-36 months) to establish a credit and operating history. They then have the capability to take out the private debt loan from the investors with a standard bank business loan at a lower interest rate.

Charles Daniel BPS Book By Author Charles Daniel, DRC's Managing Partner

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