2010 Top 10 Secrets for Private Placement Program (PPP) Transaction

This year many financiers and high net-worth individuals are looking to use private placement programs, also known as managed buy/sell programs, for funding commercial real estate deals or humanitarian projects. The current economy has created a sea of “brokers” attempting to enter the trade will little or no knowledge about private placement traders or transactions.  Moreover, the misrepresentation and new fraud in the private placement industry has pushed more traders to work with repeat clients and the trend is moving toward using only liquid capital for entering trade.  To prevent high net-worth individuals and businessmen from the headaches of dealing with these brokers, we have outlined a few secrets/tips to help guide people to success.

1. Work with professionals.  Within a few phone calls or meetings you should be able to see the knowledge someone has about private placement platforms and programs.  The character of individuals you meet will show itself and you should work only with those that act with respect and can answer questions in an intelligent manner.

2. Transact business via the phone or in person.  NEVER attempt to waste your time going back and forth over email or Skype.  Although this may be an initial form of communication, it should not be the only one.

3. Consider programs that are 100M and above.  Banking instruments such as Medium Term Notes (MTNs), Bank Guarantees (BGs), and Treasury Bills (T-bills) are purchased in 100M notes.  There are a few instances, such as when a new trader is starting out, where a pool of investors will put together 10M sums of money together to purchase one note, but it is rare.

4. Beware of large broker chains.  These are also known as daisy chains.  They are usually full of misrepresentation and conflicting information. Plus, so many of them are worried about getting circumvented in the private placement program that they will hesitate to put you in touch with someone that can actually perform a transaction! Your time will be wasted filling out NCNDs.

5. Focus on a successful transaction. Most people become so blinded by the money involved that they become paranoid, refuse to work with certain people, become greedy, try to circumvent their partners/brokers, and in the end everyone loses. 

6. Network.  Create as many resources in the private placement world as possible, qualify new leads, and refuse to work with anyone that is not genuine.  Not only will the sheer numbers help you execute a private placement program transaction, but it will also help you learn about the industry and even gain contacts that may help you in other aspects of your business.

7. Avoid PING programs.  Ping programs simply do not exist.  A line of credit that the trader uses must be drawn upon an asset or account that does not move or else the bank issuing the LOC takes an unnecessary risk in case the LOC is not paid back. 

8. Follow the rules.  ALWAYS follow non-solicitation laws that regulate what you can and cannot say regarding private placement programs, medium term notes, bank guarantees, and T-bills.  A “best efforts basis” is a term often used when describing returns.  Never guarantee any type of returns.  You may, however, mention “historical” returns but, as any high net-worth individual or investor knows, past performance is no guarantee of future performance.

9. Keep track of progress.  Keep a record of who has what connections or what team has performed in the past.  Work with those that are professional and knowledgeable in the field and keep an organized folder of any documents that may have come across your desk.

10. Do not only focus on Private Placement Programs.  Remember, this form of funding is not the only one available for commercial real estate or humanitarian projects.  Many foundations may have money set aside for projects and there are also private lenders, venture capitalists, and angel investors that can help you obtain the funding you need for your businesses.

Remember, for every 1 person that has successfully entered a private placement program there may be 100 who have failed. If you are interested in learning more Asset Investment Managementor would like help funding a project you can contact the financial professionals at www.crowncapitalfunding.com.