Why Credibility and Integrity are Important in Raising Private Money

• Credibility
• Integrity
• Transparency
• SEC Rules

If you are unsure in any way of why these things are critical in raising private money, I submit to you an article written in the November 2009  issue of Forbes. Here's a snippet:

Nearly 900 individuals across the nation are staring at losses
after investing an estimated $120 million in entities connected to
Abdulwahab. One of those is A&O Life Funds, a life settlements
outfit that, after raising around $100 million from well-to-do
investors by promising guaranteed returns of 12%, filed for
bankruptcy protection in September. Abdulwahab's W Financial peddled
supposedly secured debt obligations to elderly investors
attracted by promises of high dividends. One is a blind 93-year-old former schoolteacher. W Financial is now defunct.

The guy in this article, although not specifically raising private money to buy real estate investments, represents all that is wrong with some people out there who are trying to dupe people into parting with their funds. And, it perfectly illustrates why you have to market your private placement opportunity to stand out and apart from people like this. Put miles of distance between you and them.

Because of guys like this, our job in getting money from private investors is made just a little bit tougher. Each person that reads this article that may be an investor in your company might recall it when you are talking to them. There's no telling how much outside events effect people's decisions.

Cover your bases from the beginning with all of your investors. Firmly establish your credibility and integrity. Answer questions and objections before they arise in the conversation - address them with your marketing and/or presentation pieces.

One important thing you should note, which I discuss often, is why the "earn guaranteed returns" pitch doesn't work well in most circumstances. The crooked guy featured in the Forbes article was running around telling everyone how he could get them guaranteed returns. This isn't that far off from the 'secured' returns pitch that a lot of real estate investors try to use. I'm not saying that, if you are offering securities backed by mortgage or trust deed that you aren't offering secured returns (technically you are), but the general perception of most of your prospective private investors will be a "too good to be true" reaction.

And, if you ever wondered why the SEC regulates securities offerings, both public and private placements, the scam artists like Mr. Abdulwahab are the reason why. Once you know some of the in's and out's, you can get your securities offering documents in place quickly and at very reasonable cost. Then, you can present your investors with all of the right materials and have a much better shot at closing the deal.

If you've heard it once, you've heard it a thousand times: "one bad apple spoils the bushel." Make sure you don't let that happen with raising private money. Take a stand by conducting yourself with integrity and transparency toward your private investors. You'll never regret acting as if the actions you take one day could wind up on the front page of tomorrows newspaper.