Kim Lisa TaylorSecurities Attorney, Founder, Syndication Attorneys, PLLC · Corporate Securities Attorney, 2x Best-Selling Author, Nationwide Speaker | Private Placement

How Clients Boost Funds with Strategic Splits

29 Apr 2024 · 0 min

Watch on YouTube

0:24

In this brief segment, the speaker outlines a financing tactic used by some clients to raise additional capital. The approach involves existing owners voluntarily giving up their share of the new money (their "split") to make the investment more attractive to prospective investors. By drafting an operating agreement that includes this concession, the client can also grant the new investors a priority position—such as a preferred return of capital or a senior claim on proceeds when the deal is exited or refinanced. This combination of split waiver and contractual priority is presented as a way to entice capital while managing the distribution of future cash flows.

Something that some of our clients have done is when they've needed additional money and they want to entice people to do it, then they have given up their split on the new money. And if it's an operating agreement that we wrote, they actually have the ability to do that and to even offer that position of priority over the other investors as far as a return of capital when the deal cashes out or refis.