Business Plan vs PPM vs Prospectus

Business Plan vs PPM vs Prospectus

Business Plan vs. Private Placement Memorandum vs. Prospectus

Here at Prospectus LLC, we are global experts in the planning and drafting of any type of business plan, private placement memorandum (PPM), or prospectus. This is the case for both private and public offerings.

It turns out that raising capital can be a complicated process, and there are many documents that need to be drafted in order for this process to be successful. While a company is in the pursuit of capital, the three most important and utilized documents are the business plan, the PPM, and the prospectus. However, not all need to be written, so which one is best suited for your business?

Business Plans

Before any company can start the process of growth, of any kind, they need to first figure out how they are going to obtain additional funding. In order to do this, they need to first draft a business plan. For a company in its earlier stages, this document is the single most important for any potential further growth. Without a business plan detailing a company’s objectives and strategies, the company is probably not well informed and not ready to grow and successfully expand in their own market. If this is the case, they will most certainly not be able to raise capital from investors. A comprehensive and well-written plan is an essential component of success for any early-stage company. Some primary aspects of a business plan include the following:

  • Executive Summary: one page summary of the business and its goals;
  • Value Proposition: how your services or products solve needed problems or brings added value;
  • Marketing Plan: includes your marketing strategies as well as the overall market conditions, competition, target markets;
  • Action Plan: how you plan on getting to market and making money;
  • Financials: budgets and proforma statements.

 Private Placement Memorandum

After a company has drafted their plan, the next step is to try and obtain funding for expansion and growth. Often, companies look to raise capital by issuing securities such as equity or debt. At this point, it is wise to write a private placement memorandum. This document, also known as the PPM, discloses pertinent information regarding the types of securities being offered. This information includes the type of securities offered, the total amount of funding desired, certain risks, relevant securities regulations, and any other key information. This document is used for private placement offerings which means that this is not an IPO (not open to the public). At the end of a private placement memorandum, there is a subscription agreement, which provides the contract between the company and its potential investors. Some key features of the PPM are as follows:

  • Terms of the Offering: what you are offering investors for their capital, such as equity or debt securities;
  • Securities Disclosure: SEC or country and state disclosures, depending on country and region;
  • Offering Particulars: details of the type securities such as preferred shares, number of shares, amount and related specifics;
  • Risk Factors: a PPM will list the relevant general and specific risk of the company;
  • Subscription Agreement: the contract between the issuer and the buyer of the securities.

Prospectus

The prospectus is not a singularly defined instrument. It is more of a fluid term that can refer to different documents. On different occasions, both the business plan and the PPM are referred to as prospectuses. The document is like a private placement memorandum, except it is used to disclose pertinent information to public investors. The goal of the prospectus, often times, is to raise capital from the public. Despite this, the prospectus is also used in private placement as a term to replace PPM or business plan. This is a common practice and although it is not necessarily incorrect, it is also not precise. The majority of the time, the term prospectus is employed when a business wants to get its securities entered on an exchange. Some key elements of a prospectus include:

  • Terms of the Offering: includes the dollar amount (or other currency) that is being raised in return for issuing securities;
  • Regulation Disclosures: includes general state and country specific rules for raising capital, and if a public listing on a stock exchange is forthcoming compliance rules for selling publicly;
  • Management Team: biographies and information regarding the team (also in a business plan and PPM);
  • Risk Factors: the prospectus will outline the risks of the business, in both specific and general ways;
  • Subscription Procedures: in a private offering this would be through the subscription agreement and investor questionnaire. If via a public offering information on how to subscribe for the securities.

Conclusion

Regardless of which market you want to issue your securities in, a business plan and an offering document is necessary. The drafting of a thorough business plan shows that a company is professional and ready to expand in their respective market. The PPM and the prospectus is necessary to successfully obtain funding, and they can also add extra legal protection and to personal liability.

The team at Prospectus LLC is a world leader in the drafting and preparation of all three of these documents. We take an active approach in ensuring the success of our clients. Please feel free to contact us for a free consultation.

Contact Us Today To Schedule Your Free Consultation

Business Plan vs PPM vs Prospectus


Read More

Business Plan vs PPM vs Prospectus

Newsletter Sign Up

Get the latest updates sent to your email

For Unique Capital Growth Strategies