The Benefits of a PPM

The Benefits of a PPM


Many individuals and business owners operate under the incorrect assumption that when looking to raise capital, they can simply sell securities to any person on the street. However, the general rule is that any public offering of a security must be registered with the SEC, unless an exemption exists.

For many small businesses, registration with the SEC is not feasible due to the expense. Luckily, several exemptions from registration are offered. Some of the most common exemptions are found under regulation D (specifically Rule 506, which is a Safe Harbor under Section 4(a)(2)). Yes, it’s confusing. A Private Placement Memorandum (or PPM) is a document that businesses use to take advantage of such exemptions.

Read on to learn more about PPMs and how they can benefit your business when raising capital.

What Is a Private Placement Memorandum (PPM)

Also known as an private offering memorandum, a PPM is a legal document that an organization issues to investors. It’s a disclosure document that is used to inform the investors about the company’s offering and provides other information that may be consequential in helping investors make an informed and objective decision.

The main purpose of a PPM is to help organizations raise capital from “accredited” and unaccredited investors without registering the offering with the SEC.

What Is Included in a Standard PPM

A PPM must meet two main objectives. First, it should present the company’s offering as ideal to investors. Many have portion of a PPM look like a pitch-deck and/or business plan. The other objective and most important, is to present factual and objective information about the company’s financial and legal health.

These are the typical components of a PPM (not in a particular order):

1. Executive Summary

This section should briefly describe the company, its business, and its products and/or services. It should be written in plain English and concisely. 

2. Conditions and Disclaimers

These clauses aim to mitigate risk and inform investors about the potential ramifications of making an investment, including the possibility of losing all of their investment. This section may also a discussion about transfer restrictions, including the investors inability to sell their securities for an indefinite period of time.

3. Industry and Market Analysis

In this section, you will present competitor analysis, discuss market size and growth, identify trends in the industry, and assess your company’s ability to compete in the market.

The goal is to identify and showcase key strengths and weaknesses of the company as well as its ability to compete with other companies within the same industry. 

4. Brief Summary of Key Management & Organization Structure

The PPM should contain summary biographies of key management and other relevant employees and how the organization is structured. 

5. Certified Financial Statements

A copy of the company’s financial statements should also be provided as part of your offering memorandum. Unless otherwise noted in your offering memorandum, these documents should be prepared by an independent public accountant and audited by an independent auditor.

6. Use of Funds

This section explains how the company plans to use the money it raises from investors. This should be broken down into how much will be used for each purpose and for how long. 

7. Risk Factors

A risk factor is an uncertain event or condition that may adversely affect the value of an investment or financial instrument. They can be either internal or external, but both types are often present.

With this data, investors can better assess the viability of the investment.

8. Exhibits / Schedules

A PPM will also have various exhibits and schedules. In most cases, these documents will be ancillary agreements needed to close on the transactions between the parties, such as a subscription agreement and an investor questionnaire. It’s important to note that under Rule 506(c) of Regulation D, the company must exert a reasonable level of due diligence to confirm whether an investor is “accredited.”

The exhibits and schedules might also include the company’s business plans, financial forecasts, and other disclosures.

Potential Risks Associated With Failing to Issue a PPM

A PPM isn’t always required with private offerings but failing to issue one has its drawbacks.

Major potential risks of not offering a PPM include the following:

  • Inability to raise funds in time for the organization.
  • Court battles in the event something detrimental happens, causing losses to investors.
  • Fines, penalties, and possible loss of exemption.


It’s important to remember that a Private Placement Memorandum is a legal document. As such, it should be written to make it easy for investors to understand the investment opportunity being presented. Besides the understandable pressure to sell the offering to potential investors, it’s vital to ensure the PPM is properly drafted so you’re not caught in unnecessary legal storms in case of eventualities.

It’s not required, but it’s recommended to have a skilled and experienced lawyer advise whether it’s the best option and later work on your PPM to protect your company.

Contact the corporate attorneys at Brown & Blaier, PC, to learn more about how we can help prepare and draft a PPM for your business today.

Adam Blaier, Esq.


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