Divide your Private Placement Memo into sections and your writing sessions will be easier. There are several sections that will be included in your Private Placement Memorandum. General topics include a security disclosure, a summary of the transaction, the risks of the transaction, the description of the business, how to participate in the transaction.

The key to writing your private placement memo is first and foremost being honest and secondly telling you, don’t sell (save your sales for your power point presentation). State and federal securities laws are more interested in protecting the investor, so do not commit any lie of commission or lie of omission. This means not misrepresenting any material fact and not omitting any material information which, if included, would lead the prospective investor to a different conclusion.

Put yourself in the shoes of your potential investor. What kind of information would you like to see and have if you were at the table? The challenge will be to balance the amount of information. The trick is to present the information in a clear and concise way that is easy to understand without taking shortcuts, but also without diving into too many minutiae.

The extent of disclosure required would depend on a number of factors, including the size of the offering and whether you are offering the investment to non-accredited investors. Try to err on the side of caution – not having enough disclosures can risk violating securities laws, but there is no harm in over-disclosure.

Divide your Private Placement Memo into the following sections when preparing to put together a draft:

Notices to Investors: This section will include disclosure captions informing potential investors that the securities described are not registered with the SEC. This is mostly repetitive and mostly cut and paste. Depending on your offering, you may need some additional state-specific disclosures.

Term Sheet: The Term Sheet provides a summary of the security you are seeking to enhance through your offering document. Some of the parts included in the term sheet include the purpose of the issue, the identification of the issuer, the type of security being issued (debt, preferred shares, common shares), the specific terms of the security being issued (dividends or interests). , current or increased payment, warrants, collateral), affirmative and negative covenants, previous conditions, etc.

Risk Factors – This is the section where you describe all the reasons why a prospective investor should not invest in your transaction. This is the CYA section and should be as complete as possible. This section sets out the specific risks of the company and the risk of investing in the type of securities that are issued. Some examples include reliance on customer concentration, cyclicality, inability to achieve projections, changes in regulations, etc. Read the prospectus of any public company and you will have an idea of ​​the types of risks to identify and discuss.

Conflicts of Interest – In this section, you will want to describe any situation where someone associated with the transaction may have a conflict of interest with the Issuer. An example could be a director of the Issuer who is also the principal of the Issuer’s main supplier. A good filter for this is if you’re wondering if it’s a conflict of interest, it probably is.

Description of the Issuer, its Business and the Business Plan: this section describes the actual business of the Issuer. It shall include an analysis of the Issuer’s products, strategy, customers, sales and marketing, operations, competitive and industry analysis, and analysis of the Issuer’s management.

Description of the transaction: While the term sheet describes the value that is issued, this section describes how the value that is issued fits into the transaction. This section would include an outline of the transaction, a table of sources and uses, and a capitalization table.

Financial information: The financial section would include a presentation of the Issuer’s historical financial results with a discussion and analysis of the results. This section would also include the management forecast and a discussion of the assumptions behind the forecast.

Subscription section: The subscription section provides the prospective investor with instructions on how to participate in the offer.

Some sections will require more work than others. But in general, when you divide your PPM into sections, the overall writing task will be easier. Remember to stick to the facts, put yourself in the shoes of your potential investor, tell it, don’t sell it, and be direct in everything that comes your way. Follow these tips and you will find that your writing sessions will run smoothly and you will end up with a document that will do your transaction justice.