A private equity firm, private equity group (PEG), or private equity fund consists of a firm that has a large pool of money available to be invested in businesses or to acquire profitable companies. They generally raise their funds from wealthy individuals investing as limited partners, pension funds, university endowments, insurance companies, and other sources. Micro private equity firms generally target smaller companies.

Private credit firms or funds consist of firms that make loans to businesses who may have difficulty securing bank credit or require a longer term loan that may be available from commercial banks. Private credit firms obtain their funds from the same sources as private equity firms.

 

An equity kicker is a financial incentive whereby a lender provides credit at a lower than market interest rate in exchange for an equity position in the borrower's company. The equity kicker may take the form of stock or warrants.

 

Operating Partners

Operating partners are independent advisors to private equity firms who actively contribute to the strategic and operational development of portfolio companies.

Operating partners are generally former CEOs, CFOs, or COOs with proven track records of business leadership and success. They provide their expertise to portfolio companies with regards to operational knowledge, and provide access to a deep network of industry resources.

 

Hedge Funds

A hedge fund is a large privately managed investment fund that pools capital from a limited number of wealthy accredited investors. They use aggressive investment strategies and seek high returns. Strategies include using high leverage and short selling. Hedge funds are not highly regulated. They typically charge their investors both a management fee and a performance fee.

 

Shadow Bank

A shadow bank and banking system exists when non-bank financial intermediaries participate in creating credit, but are not subject to the same strict regulations that commercial banks must follow. The shadow banking system consists primarily of private equity funds, mortgage companies, real estate investment trusts, hedge funds, investment bankers, and brokerage firms. Instead of lending funds generated by deposits, participants in the business of shadow banking obtain funds through lines of credit, the sale of securities, and other sources. Many shadow banks perform maturity transformation which is using short-term funds to finance longer-term investments. This creates a liquidity risk.

 

 

Shadow Banking System

A shadow banking system exists when non-bank financial intermediaries participate in creating credit, but are not subject to the same strict regulations that commercial banks must follow. The shadow banking system consists primarily of mortgage companies, private equity funds, real estate investment trusts, hedge funds, investment bankers, finance companies, and brokerage firms. Instead of lending funds generated by bank deposits, participants in the business of shadow banking obtain funds through lines of credit, the sale of securities, and other sources.

 

 

 

Unquoted Public Companies - Unlisted Public Companies

Accredited Investors - Net Worth Standards

Debt Service Ratio for Business Loans

Angel Investors - Groups

Personal Guarantee of a Loan