Private Equity Interview Preparation Guide

A private placement is when you sell your company's stocks or bonds to private investors.
Example:
If you run a start-up shopping site, you might offer private stocks to a private investor. This investor gives you money to fund your burgeoning start-up in hopes that he or she will see a large financial return on their investment.

Private placements must come from what the SEC terms an "accredited investor" but know for starters that accredited investors are generally wealthy individuals or organizations.
Example:
For a single person to be classified as an accredited investor, they must have a net worth of $1 million or a yearly income of $200,000. Trusts, banks, investment and insurance companies also qualify.

☛ Operating Agreement
☛ Private Placement Memorandum
☛ Subscription Agreement
☛ Accredited Investor Questionnaire Form

An operating agreement is a legal status and a plan that shows how your business runs will be crucial in securing the sort of savvy investors your small business will want.

A private placement memorandum outlines the terms and conditions upon which you are offering interests in your business. You can think of it as a brochure for your business, where you alert potential investors to the facts they will need to know about your company. You can set the amount of stocks you are offering overall, the price for each, how many an investor can purchase, when that investor will receive stocks, and pertinent information about your company (such as its founders, age, projected profit, etc.).

A private stock offering is when you sell securities in your business without an initial public offering, It is usually called an IPO.

A subscription agreement is an agreement. When a private investor decides to purchase securities in your small business, a subscription agreement is the contract you use to put the investment in writing. It should note the price and amount of stocks being purchased in addition to information about the company itself.

An accredited investor questionnaire is used by companies and individuals to validate that they are in fact an accredited investor as defined by the SEC. Making sure your investors are accredited investors can save you a lot of hassle down the road when your business is growing even faster. Lawyer provides this form as part of the Subscription Agreement.

Secured business loans require the borrower to provide collateral or any form of acceptable security against the amount being borrowed. Depending on the lender's criteria. The borrower can use his or her home, car, equipment, inventory, cash savings and/or accounts receivable to guarantee that the loan will be repaid.
Secured loans pose less risk to the lender since they have something that can be called upon when the borrower defaults on his repayment. As such, this type of loan offers higher loan amounts, lower interest rates, faster approval rates and longer repayment terms.

Unsecured business loans do not require any collateral and merely rely on the credit history and financial capability of the borrower. This type of loan is usually offered to individuals or business owners who are considered to have good credit or those who have large balance sheets, short-term assets and/or impressive cash flows that are in excess of the required loan payment.
Unsecured loans carry more risks, they offer lower loan amounts, higher interest rates and shorter repayment terms. Despite these things, however, unsecured loans can be a relatively easy and flexible way for business owners to get additional funding for their endeavors.