FAQ

How can I become an investor on the Flatrock platform?

After you sign up, we’ll invite you to a 15-minute onboarding call. After that, we will request proof of your “accredited investor” status. Once that’s verified, you will be able to start accessing investment opportunities.

What is an accredited investor?

To be an accredited investor, a person's annual income must exceed $200,000 for the past two years ($300,000 for joint income), or a person's net worth must exceed $1,000,000 (not including one's primary residence) either singly or jointly with spouse.

How do I establish my “accredited investor” status?

To prove income or net worth, you'll be asked to provide documents such as tax returns, bank/broker statements, credit reports and other relevant documents. Or you could provide a 3rd party verification letter from your accountant or attorney.

Why is Flatrock only open to accredited investors?

Private business investments are inherently risky and require thorough diligence. At this point, we believe that accredited investors are best equipped for this. However, we do hope to serve a broader investor base in the future.

Are there fees to invest on the platform?

Each deal has a one-time management fee of 1-2% of invested capital. The management fee covers Flatrock's legal and administrative costs of creating and managing the investment vehicle. Additionally, Flatrock charges 200-300 Bps incentive fee for managing the long-term investment: providing ongoing reporting, collecting interest , making distributions, providing tax documents, handling defaults or workout scenarios.

What types of businesses partner with Flatrock?

We typically partner with well-established, cash flowing brick and mortar and online businesses. These include manufacturers, distributors, business services, home services, and medical practices.

How does Flatrock screen and select eligible businesses?

We evaluate the financial, strategic and leadership aspects of each business. The business must be at least 3 years old, with $1mm in EBITDA and a healthy balance sheet. Leadership must have a strong track record and a clear and compelling investment strategy. Additionally, all principals are required to go through rigorous background checks.

What types of investments does Flatrock offer?

We offer two types of investments: preferred equity and mezzanine debt. Preferred equity is structured as convertible stock, with a 5-7 year target, often with a 6-9% dividend. Mezzanine debt is typically structured as a 5-year interest only loan ("bullet loan") with 12-16% interest rate and often includes equity warrants (for additional upside).

How can I monitor my investments?

You'll be able to access company reporting (quarterly financials, annual reports), company communications and distribution history in your Flatrock account.

What type of returns can I expect?

We typically target 30-35% IRR (4x MOIC) on preferred equity and 15-20% IRR on mezzanine debt.

When can I expect the return of principal?

Mezzanine debt investments typically are repaid after 5 years - through an exit, refinancing or cash on hand. Preferred equity investments have investment periods of 5-10 years, where investors are repaid upon a liquidity event. If the sale doesn't occur by the target period, investors are able to redeem their investment, which requires companies to repay the principal over a 2-3 year period.

How do I receive payouts from the investment?

As the managing member of the special purpose vehicle (SPV), Flatrock facilitates the collection and repayment of interest or distributions. Interest payments are typically paid monthly or quarterly, while preferred dividends are typical paid quarterly or annually.

How is the investment structured?

Multiple investors co-invest in a deal through a special purpose vehicle (SPV). An SPV is dedicated LLC with its own operating agreement and bank account - completely distinct from the Flatrock platform. Flatrock Management serves as the Managing Member of the LLC, serving as the primary contact with the business for business reporting, payouts and disputes.

What legal protections do I have?

Each deal will contain a detailed disclosure statement and subscription agreement defining the risks and terms of the investment. We strongly suggest that you engage an independent attorney and/or investment professional to review these documents before investing. In the case of any dispute, Flatrock will negotiate with the company, and try to achieve the best possible outcome for investors.

What happens if an investment isn't successful?

Flatrock cannot guarantee the investment will achieve the target return. However, Flatrock will represent investors to ensure all covenants are met, and that the company is abiding by their agreements.

Why should I consider Flatrock?

Flatrock provides flexible equity and debt capital for growth, acquisitions, partnership buyouts and partial liquidity events. Unlike banks, our investor pools don't require collateral or personal guarantees. In addition to the capital, you can leverage your investor pool for advice, knowledge and connections.

What is the process to raise capital?

After you contact us, we'll schedule an in-depth call to discuss your goals and to explain the platform. If you'd like to move forward, we'll begin the due diligence process. You'll provide a business summary, financial statements and other relevant materials for Flatrock to review. Once your deal is approved, we'll work together to finalize the deal structure and gauge investor demand. Lastly, we'll produce the legal documents and promote to our investor base take commitments over a 4--6 week period. The transaction will be executed via a special purpose vehicle (SPV), a single entity representing investors' interests, and funds will be wired to your bank account.

Is my company eligible to fundraise?

We typically partner with well-established businesses with $1mm to $10mm in EBITDA. We accept a broad set of businesses types including manufacturing, wholesale & distribution, business services, home services and medical practices.

How much capital can be raised?

Eligible businesses can access up to $10mm in debt or equity capital - with a minimum raise of $500,000.

How can the funds be used?

Businesses can use the funds for expansion, acquisitions, partnership buyouts, dividend recaps (partial liquidity events), family and management transfers.

Who is providing the capital?

The funds are provided by a collection (or syndicated) of "accredited investors". These are high net worth entrepreneurs, executives and other professionals.

What are "accredited investors"?

These are individuals with over $200,000 in annual income or net worth exceeding $1,000,000 (excluding primary residence).

What deal structures are available?

Flatrock offers two options for raising capital: preferred equity and mezzanine debt. Preferred equity is minority ownership in the company, typically with preferred annual coupon of 12-18%, convertible to common equity upon exit or sale. These transactions are often structured so that the company has the option buy back the shares after a 5-10 year period. Flatrock enables minority sales representing 5-45% of the company. Mezzanine debt is unsecured, interest-only debt (10-16%), payable at the end of a 5-7 year period. Mezzanine debt is subordinate to senior notes or lines of credit, but is senior to preferred or common equity. Some mezzanine debt deals will include warrants that provide investors with an "equity kicker" (or upside) at time of company sale. Mezzanine debt limits are typically 3-5X EBITDA.

Does Flatrock charge fees to raise capital?

Flatrock typically charges a 3-6% transaction fee to raise capital and annual 0.25%-0.5% servicing fee to handle investor communications, information sharing and distributions.

What role does Flatrock play in the transaction?

Flatrock is a technology platform that matches accredited investors with private company investments. We screen businesses and investors, help structure and promote investment opportunities, organize and manage investment syndicates and enable communications and payouts to investors.

How is Flatrock regulated?

The investment offerings on Flatrock are exempt from registration under Regulation D, Rule 506(c).

Is my company's information confidential?

Only verified accredited investors will have access to your investment offering summary. Furthermore, when you receive indications of interest, you will have the option to review investor profiles before approving their request for full access. Before gaining access, each investor must sign a confidentiality agreement.

Can I interact with potential investors?

Yes, you will have the opportunity to post messages on the group forum as well as direct messages to investors. Each capital raise also includes an offering webinar with investor Q&A.

Can I review and approve interested investors?

Yes, you have the option to approve or exclude individual investors in the syndicate.

What happens after the deal closes?

Once investor commitments are finalized, Flatrock establishes a single purpose vehicle (SPV) to execute the transaction. Flatrock will sign the loan or stock agreement on behalf of the investor syndicate and the funds will be delivered to your account within 5-7 business days. You will be responsible for providing quarterly financials and annual reports for the duration of the investment. Any interest or dividend payouts will also be processed through the Flatrock platform.

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