I need help or advice

Nataanii said:

I've recently been trying to find investors for my film project and I found two investors interested in the project but, one said this:

"Can you state the annual return i should expect from the money invested.The funds will be given to you on a loan basis for 5 years while the investment of the funds will be based on your judgement,discretion and expertise, you will have complete control on the investment funds.The funds will be disburse to you after a Promissory note and Agreement is signed by you and us.Please let me have your response asap, I need to know, How secured is my investment? How much money can I make?"

I'm writing asking for advice and assistance because, I'm not sure how to respond or what exactly does he mean by "annual return"? What does "loan basis for 5 years, while the investment of funds will be based on your judgement discretion and expertise" mean? And how should I respond to: "how secured is my investment"? I mean, because in filmmaking and in investing in filmmaking, it's all a risk, so how should I answer that?

The second investor said I have to create a PPM (Private Placement Memorandum) and he said, The PPM should be structured as such: Redeemable Series "A" Preferred Membership Interests, (Units) par value $0.0001 at $10.00 per Unit Preferred Return: 8.00% per Annum 1,000 Units, ($10,000.00) Minimum Offering Amount

Now I have NO idea how to write a PPM, or what those structure terms mean, and I was told I should get a lawyer to explain things to me but as I stated, I am a very young filmmaker and I don't have money for a lawyer, so how should I respond to these investors? And how should I prepare this PPM. Can someone please help? Because I don't want to do it all wrong with the second investor or answer it all wrong with the first investor and lose out on funding, with me being a new and young filmmaker and all.

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I'm not in any way any kind of financial expert at all, so grain of salt and all that.

From what that says, the first looks to me not like an investor but like someone who is willing to loan you money for a specified rate of return.

Like he or she is offering you a five-year-loan at X percent, and wants to know what percent return you're giving on the money.

The second seems to be looking at it as if you're structuring it as you're offering shares, or assigning a value to the entire thing, with again, I think, a specified rate of return, and selling equity shares.

How did you find these investors?

Nataanii said:

Well, I went on every investor forum I could find, posting for investors and even went on Craigslist and those two came from Craigslist I believe. I'm more leaning towards the first one, because with the first one, I kinda feel more secure, and then with the second one, I have NO idea how to create a PPM, especially one like he's requesting...

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How many short YouTube-type films have you made with your friends or even with professional actors? If the answer is none, you are not ready for investors.

Craigslist, really? For investors?

Are you legally an adult? If so, do you own anything that a lien can be put against? If you do, then just sell all your valuables/property outright and make whatever film you can afford. Then at least you won't end up in a legal nightmare when you don't make any money. Hey, you may end up homeless but at least you'll be a "filmmaker".

Seriously, don't do it.

> those two came from Craigslist

Ah. Most likely loan sharks. How many limbs are you willing to sacrifice for this project?

Get a lawyer. This is serious stuff.

-cb

Have you considered crowd-funding sites like Kickstarter and Indiegogo? Lots of film and video projects are raising money there, on their own terms.

As far as the OP, I agree with what others advised. Finance 101 says if you don't understand a financial instrument or agreement, don't get involved in it. Note that both offers you described will require you to sign documents promising a financial profit to the financier, regardless of whether your film makes money.



Best wishes,
Peter DiChellis

Nataanii said:

Well, I went on every investor forum I could find, posting for investors and even went on Craigslist and those two came from Craigslist I believe. I'm more leaning towards the first one, because with the first one, I kinda feel more secure, and then with the second one, I have NO idea how to create a PPM, especially one like he's requesting...

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Seriously?

You're leaning towards accepting a large loan of cash from a person on Craigslist - all done without legal advice or backing?

If there were a book of bad ideas, this would be in it.

If you don't have a lawyer doing the paperwork on it, you don't have investors, kind of period, the end. How were you going to manage investors without knowing how to document their investments? How are they going to make money?