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Home » PRIVATE PLACEMENT

Using Hard Assets for Private Placement Investments

apply-private-placement-investment-assetsHave you ever heard of the saying “their asset rich, but cash poor”?  Well, when working in the private placement world, you quickly realize how many people fit into this category.  Whether you find an investor with copper mines, diamonds, precious metals, or anything else, the fact is, hard assets have flooded the private placement business.  You may say to yourself, “this should be good for everyone right”?  Unfortunately, it’s not that simple.  As you will see, pursuing hard asset deals can be a double-edged sword, despite what many fee-happy brokers may claim.

In this article, we will cover everything you’ve ever wanted to know about hard asset hypothecation, and how it applies to private placement programs.  This will give you both direction and experience, and most importantly, it will teach you how to ask the right questions.  Before we go any further, lets define what a “hard asset” exactly is.

By definition in the private placement world, a “hard asset” is any asset that is considered illiquid, containing a “value” that can fluctuate based upon demand.  To give you an example of what we mean, we have listed a few of the most common hard assets below.  In addition, we have provided detailed summaries to help you avoid the typical “hard asset” learning curve.  Scroll down, and take a look!

List of Common Hard Assets in Private Placement

Precious Stones:  This can be diamonds, rubies, and other precious stones owned by a collector.  These stones will come with a gem certification and appraisal, and should also have a SKR (Safe Keeping Receipt) as well.  In most cases, precious stones are very tough to monetize unless you can sell them in the open market, or you have a private investor to loan against them.  Either way, though I have heard of gems being used for private placement trades, it should be considered rare and tough to achieve.

Valuable Art:  This can be paintings, antiques, collectibles, and other similar items.  As you would expect, this would be VERY hard to take into trade because they are completely illiquid items.  The value of art is completely based upon demand, and with the unstable global markets, it has becomes tougher to get a loan against art than ever.

Precious Metals:  If you have an asset such as gold, silver, platinum, copper or other metals, we may have good news for you. Currently, precious metals such as gold are in high demand, and can be converted into cash far easier than most assets by banks.   If you have gold bullion, you’ll almost always be able to get into trade, since most banks will loan against gold bars. On the other hand, if you have lower grade gold (“gold ore”), or other metals, you may still have a tough time finding a program to accept the asset.

In-Ground Assets:  In the private placement world, in-ground assets are EVERYWHERE.   Some examples of these are oil interests, copper mines, gold mines, and other similar assets.  Even though these assets may be worth Billions on their appraisals, in most cases, they are pretty much worthless for private placement investments.  This is due to the high excavation costs associated with removing the asset from the ground.  If the bank may have to spend their own money to extract value from this “in-ground” collateral, they will pass on it every time.

Real Estate:  If you have valuable real estate, private placement is only realistic if you get a loan against the property and utilize the cash to invest.   Despite what many private placement brokers may claim, once the real estate market crashed, it became next to impossible to use property to go into trade. Currently, banks are trying to retain all of the liquidity they can, and real estate is no longer a “stable” asset class in their eyes.

Since you now understand what a hard asset is, and some common examples, let’s explore the burning question you all want to know….

Can hard assets really be used for private placement programs?

To greatly simplify the answer, YES, hard assets can be used for private placement investments.  Though this is true, you must also know that there are several obstacles associated with completing such an arduous task.   To communicate these facts to our readers, we have listed the process below to demonstrate the unlikelihood of this process actually working.

Steps to Success for Hard Asset Investors

1.  Asset Must be Valuable in Market and in Strong Demand
2.  Private Placement Trader Must be One of the Very Few that are Real
3.  Bank or Private Investor Must Lend Against Asset and Specify LTV (Loan to Value)
4.  Trader Must Access Line of Credit Against Asset and Make Trades Successfully
5.  Asset Must be Unencumbered After the Private Placement Investment

Unfortunately, even though clients with hard assets are abundant in the private placement business, REAL lenders and private placement investments are not.  Before the global credit crisis it was already tough to close a hard asset deal, but in today’s private placement market, it is nearly impossible.  Banks across the world are holding on to as much liquid capital as possible, and are extremely reluctant to loan against anything that is illiquid, such as the “hard assets” we discussed.

In summary, if someone could successfully convert illiquid assets into a line of credit (100M+) for a real bank instrument trader, they would be one of the richest people in the world.   The problem is, the process of doing so relies on many moving parts which in most cases never align as planned.  Though we have put effort into countless hard asset transactions which all produced nothing, we can honestly say that we HAVE been close. If you choose to pursue these transactions like we did, remember what you have learned in this article, and you just may have a chance to beat the odds!

InsideTrade LLC Staff

Phone: (949) 444-2111

11 Comments »

  • Proof of Funds, Indentifying Real and Fake Assets | InsideTrade LLC said:

    [...] 3.  Hard Assets:  If you find an investor with Billions in precious stones, metals, real estate, or other illiquid assets, don’t think it’s that easy.  The easy part is finding someone with hard assets looking for private placement. The hard part is finding a REAL program that will hypothecate and trade the asset at a LTV (Loan to Value).  For more information on hard asset investing, click on the article “Using Hard Assets for Private Placement Investments”. [...]

  • jimmy d said:

    I have been trying to invest in ppp with real estate and it didnt work over and over. I guess I am going to give up because it seems like this make sense. To the staff of these articles, thank you for saving me this huge amount of time I would have lost.

  • fasar khan said:

    In 2010 it is very difficult to find private placement programs that accept hard assets. It's just too much work for them and not really worth their time, unless the hard assets are worth a very large sum but it may still prove very difficult. When potential investors get in contact with me, I tell them how it is and don't accept any applications with hard assets, it's just too much of a headache. Cash and owned instruments are good.

  • Rick Castello said:

    Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime. Can somebody please educate me on private placement platforms or programs ? My email address is ppp@revenue.com

  • Antonio Oliveira said:

    Dear SIR,
    I represent one FOUNDATION with Inground Assets(Mines-Gold,Manganez,Nickel)witt docs.originals is real and genuione and are interested application in PPP.
    The originals is Geologic Report and Evaluation Report and Land docs.,not deposited in Bank system and not have SKR or SWIFT MT 760.
    Your have directlt TRADER interested application Billions USD in Evaluation Report,please contact to my e-mail:
    ajcoliveira4@gmail.com
    Skype:ajco11
    Sincerely
    Antonio Oliveira

  • Richard said:

    This is an excellent article. I have heard that in order to use a hard asset like a mine that has been previously mined and contains gold, silver, platinum & a few other precious metals, one would need to incorporate something known as an insurance wrap/bond that would be worth a certain % of the value of the mine and that "insurance bond" could be used to get a certain % less than what the bond was worth and use that as collateral to get funds to be placed into trade! For example: Gold mine is proven to be worth $30B, client can get an insurance bond for 20% of that value (6B) and then get a line of credit worth around 20% of that ($1.2B) and use that to go into trade. Is there any validity to this claim at all?

  • Lisa said:

    Hello,

    you are totally right pp normally do not work with standard hard assets. The real people in pp are not experts for real estate, gemstones etc. Even real paper documents are difficult to use.

    You should inform your clients with real hard assets that they may look to get may be 25% out of the hard assets in cash from business partners who can evalute the assets. The chance to be able to enter a program with cash funds is much better.
    But as it is not sure that your client will be accepted to enter into a pp he has the risk to loose quite a lot of money.

    Sometimes there are Spot programs available which allow an investor to participate with an amount of 1 M € in cash. It is better to get some return on a small amount than no return on the hard assets.

    Best regards

  • Lisa said:

    Hello,

    I think that insidetradellc gives all the basic information to understand about ppp.
    All information described is clear for the insiders and all the comments you have to judge by yourself. Don´t believe all the figures you see. Read all very careful and make up your mind by yourself.
    All information about ppp you will not get because it is a business on invitation only. Each real business entity also ppp has its secrets. If ppp would be like a supermarket where everbody gets everything ppp would not exist anymore.

    From time to time Spot programs are available to enter for real investors having cash funds on their bank account starting at an amount of 1 M €.

    Best regards

  • see more said:

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    joined your mailing list, browsing even more of your
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  • Galina said:

    We can offer the Program (PPP) under financial instruments client (CASH on the account, BG).

    e-mail: chuvilinagalina@yahoo.com
    skype: galina_chuvilina

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