Final answer:
Under SEC regulations, a potential viewer must complete and sign an accredited investor questionnaire to access a private placement online. The process acknowledges that accredited investors meet certain financial criteria and can handle the risks involved. Furthermore, the answer discusses early-stage corporate finance, differences between bonds and bank loans, and calculates home equity.
Step-by-step explanation:
Under SEC rules, to access a private placement offered via the web, a potential viewer must complete and sign an accredited investor questionnaire. This requirement ensures that the potential investor meets certain income or net worth criteria defining accredited investors, who are deemed capable of taking on the risks associated with such investments. This process is part of a broader set of regulations that govern private placements to protect both investors and issuers.
Early-Stage Corporate Finance:
When considering early-stage corporate finance, very small companies typically raise money from private investors instead of through an IPO due to the costs, regulatory complexities, and disclosure requirements associated with going public. Conversely, small, young companies may prefer an IPO to acquire a larger sum of capital that might not be available through bank loans or bond issuance. Among investors, a venture capitalist often has better information about the profitability prospects of a small firm compared to a potential bondholder, primarily because venture capitalists usually engage in more in-depth evaluations and monitoring.
Comparison Between Bonds and Bank Loans:
From a firm’s point of view, a bond is similar to a bank loan in the sense that both are ways of raising capital through debt and require repayment with interest. However, they differ in terms of the legal structure, repayment schedules, interest rates, and the level of regulatory oversight. Additionally, a bond may be traded openly in the markets, providing liquidity, whereas a bank loan is typically held to maturity by the original lender.
Home Equity Calculation:
To calculate the equity someone has in their home: for instance, Fred has $20,000 in equity in his newly purchased $200,000 home after putting down a 10% down payment and borrowing the remainder.