Don't expect investors to give you capital based on a handshake. For example - would you invest funds into a company without signing a document that sets forth the terms and conditions of the investment? The Subscription Agreement sets forth these terms and conditions - this is the document the investor signs and gives you with their investment check. You will have a very hard time raising debt or equity capital without this basic document.

Another example (for debt transactions) would be the Promissory Note Agreement - the note is the actual loan agreement between the investor and the company. You can't have a business loan without a loan agreement. A business plan does not provide this key document.

The Private Placement Memorandum, or "PPM", is the document that discloses all pertinent information to the investors about the company, proposed company operations, the transaction structure (whether you are selling equity ownership or raising debt financing from the investors), the terms of the investment (share price, note amounts, maturity dates, etc.), risks the investors may face, etc. Do not confuse the detailed disclosures and transaction structure in a PPM with the general information a business plan provides - they are not the same. A Private Placement Memorandum and Subscription Agreement, combined with your business plan, provides the fundamental documentation needed to raise capital properly from investors.

Would you invest into a private company that did not approach you in a sophisticated manner? Would you invest into a company that did not even provide the basic documentation needed to raise capital?

If you answered "no" to the questions above - don't expect that investors into your business will answer differently.