A private placement memorandum (PPM) is a document which contains relevant and full disclosures so that the investor can accurately weigh the risks involved with an investment and make an informed decision with respect to said investment.

Well written PPMs are conservative when it comes to projections, in that they do not over-inflate the potential value/revenue of the company. They also are written as to excessively document any and all potential risks to the investor. A PPM signals to investors that you are serious about the process of raising capital. It contains a targeted timeline for closing the offer. 

PPMs need to effectively explain the business and most especially the business risk, giving an accurate assessment of the financial picture and providing the necessary legal disclosure. 

Financial, accounting and legal legwork is required to develop a strong PPM. This document is an opportunity for a company to put its best foot forward and demonstrate to investors that investing in this entity is worth the risks. In order to get to a signed document and a check from investors, they need to feel comfortable. A PPM is instrumental in that progress. Disclosure documents like PPMs also protect the company from later fraud claims. 

 A PPM is designed to meet the disclosure requirements of Rule 502(b)(2) of Reg. D of the U.S. Securities and Exchange Commission (SEC).

The cost and complexity of providing one of these documents is quite significant. Although there are usually some boxes that need to be checked in terms of disclosure items, PPMs typically do not have a standard form. They are very deal specific, with the focus on disclosing relevant information applicable to a specific company. This is why so many business owners find that creating their own PPM is complicated; there is no set form to follow. PPMfunding.com has professionals on hand to create these PPMs in the best way possible for each business.

A PPM has to be professionally written. Mike Goodrich from Goodrich Law Firm, LLC and others generally estimate the cost of creating a PPM to be $20,000-$30,000. PPMFunding.com currently charges $14,900 and that price includes posting the PPM and subscription Agreement on their platform for accredited investors to review.

Additionally, the process itself has to be managed. A general ban on solicitations and the confidential and proprietary nature of many PPMs requires the number and recipients participating in PPMs to be controlled. This means getting people to invest requires a good deal of effort and management. 

Click on the appropriate word to Create or Promote your PPM or Invest in someone else's.