FAMILY OF NOTES OFFERING:

In the current economic climate, bank financing can be difficult to obtain for even the most creditworthy borrower. Traditional lending sources for businesses have tightened the reins. Business owners may be tempted to turn to private lenders, which can allow their business to improve its overall financial situation, or to seize a business opportunity that would otherwise pass them by.

 

It seems simple: the company borrows the money, issues a promissory note, or notes evidencing the obligation to repay the private lender(s), and moves forward with the business. Unfortunately, things are not always as simple as they seem. Business owners should be aware that in many circumstances, issuing a promissory note to raise money may implicate Federal and State Securities Laws.

Promissory notes are securities by definition. Although not widely known, State Securities Laws and the Federal Securities Act of 1933 include a “Note” and “Evidence of Indebtedness” in their respective statutory definitions of a “Security.” However, that does not end the analysis.

The “Family” of Notes:

Federal Law expressly categorizes a Note arising out of a current transaction with a maturity at time of issuance not exceeding nine months as an “Exempt Security,” meaning that Federal Registration requirements will not apply.

 

However, under the controlling U.S. Supreme Court ruling (Reves v. Ernst & Young, 110 S.Ct. 945 (1990)), Federal Law also sets up a rebuttable presumption that a Promissory Note with a maturity greater than nine months IS a security (as the statute requires) UNLESS it resembles one of a “Family of Notes” generally not considered to be a security for Federal Law purposes. The Reves court found the following Family of Notes not to be securities, regardless of maturity:

 

  • Notes delivered in consumer financing.

  • Notes secured by a mortgage on a home.

  • Notes secured by a lien on a small business or some of its assets.

  • Notes relating to a “character” loan to a bank customer.

  • Notes that formalize an open-account indebtedness incurred in the ordinary course of business.

  • Short-term notes secured by an assignment of accounts receivable.

  • Notes given in connection with loans by a commercial bank to a business for current operations.

 

The court went on to hold that Notes that do not fit cleanly in one of those categories can be evaluated for family resemblance using the following factors, in no particular order of importance:

  1. Whether the borrower’s motivation is to raise money for general business use, and whether the lender’s motivation is to make a profit, including interest.

  2. Whether the borrower’s plan of distribution of the note(s) resembles the plan of distribution of a security.

  3. Whether the investing public reasonably expects that the note is a security.

  4. Whether there is a regulatory scheme that protects the investor other than the securities laws (e.g., notes subject to FDIC regulation).

 

Common Notes that fall into this category that Private Placement Markets does Family of Notes Offerings for:

  • Owner Occupied Real Estate (must be for the owner or proposed woner of the Subject Property or a State Registered Mortgage Lender).

  • Non-Owner Occupied Real Estate

  • The Purchase or Refinance of Equipment:

    • Airplanes

    • Trains

    • Trucks

    • High Priced Equipment

    • Stock Portfolio Loans

To Retain and Engage Private Placement Markets for a Private Note Offering:

Since 2017, we have prepared of Secured and Unsecure Note Offerings for companies. 

 

Service(s) to be Provided:

  • No SEC Registrations Required.

  • Drafting & Preparation of a State & Federal Securities Laws Compliant Note Offering.

    • Our Custom Notes Offering Preparation includes (but is not limited to):

      • Offering Structuring and Development of a Presentation Grade Notes Offering,

      • Federal & State Securities Laws Compliance Review, and

      • Access to our Broker-Dealer Network & International Institutional Investment Banking Network (See www.PPMEquity.com & www.PPMDebt.com)

To engage us for a Custom Notes Offering Preparation:

  1. Private Placement Markets is very selective about the Family Of Notes Clients it engages with. Please call our Capital Markets Team or email us as the contact listed to the left, and we will schedule a time to speak regarding your Family of Notes needs.

  2. If there is a mutual interest to engage for the Drafting of your Note, we will forward you an engagement letter to be signed, at which time you will be required to submit a retainer equal to 50% of our service charge for the drafting of the Coin Offering Memorandum. Our total estimated cost for a Coin Offering is a Flat $1,750 USD (50% = $875 USD). NOTE: The balance of $875 will be due and payable 30 days net from retaining services or upon delivery of a final Notes Offering Document whichever comes first.

  3. Once complete, we will send you an email with information detailing the necessary information we need to get started working on your offering.

  4. General Time from Start-to-Finish, given the vast number of Offerings we have done over the past four plus years, approximately one week. 

Mr. Steve Muehler

Founder & Managing Member

Private Placement Markets

101 California Street

San Francisco, CA 94111

Email: Steve@PPMSecurities.com

Phone: (877) 259-8066

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Private Placement Markets, LLC (a Delaware Limited Liability Company) provides no depository services and is not insured by the FDIC. Private Placement Markets is an Investment Banking Industry Document Preparation Company and Capital Markets Advisor. Private Placement Markets does not offer, and does not offer to provide any broker dealer or market maker services. Private Placement Markets operates this website (referred to as the “Website”). By accessing this Website and any pages thereof, you agree to be bound by its Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. Private Placement Markets does not provide financial planning services. Private Placement Markets does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.

 

© 2019 by Private Placement Markets, LLC & Steve Muehler