Frequently Asked Questions

Iron Oak Capital offers investment opportunities under SEC Rule 506(b). This allows an unlimited number of accredited investors and up to 35 non-accredited investors to participate in an offering, as long as potential investors have a pre-existing substantive relationship with Iron Oak Capital management, for at least 30 days before the start of an offering.

To qualify as an accredited investor, a potential investor must meet at least one of the following.

As a natural person:

• Earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years and reasonably expects the same for the current year, OR

• has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR

• Holds in good standing a Series 7, 65 or 82 license.

As a legal entity:

• Any Trust, with total assets in excess of $5 million, not formed specifically to purchase the subject securities, whose purchase is directed by a sophisticated person, OR

• A certain entity (Corporation, LLC, etc) with total investments in excess of $5 million, not formed to specifically purchase the subject securities, OR

• Any entity in which all of the equity owners are accredited investors.

It varies deal by deal; in most cases, our minimum investment requirement in a deal is $50,000.

Yes, by utilizing a self-directed IRA and/or self-directed 401k it is possible to receive income and capital gains tax free.

In addition, depending on your personal income tax level it is possible to receive dividends and long-term capital gains from a business at a 0% tax rate.

We primarily seek stable businesses across diverse sectors, emphasizing industries showing consistent performance. Examples include manufacturing, service, wholesaler distribution, e-commerce, real estate, and, in certain instances, retail businesses.

Businesses are selected based on their consistency and their industry's stability. We utilize a 30-point evaluation system, with each point offering specific insights that affect the likelihood of success. High-scoring businesses are typically acquired to optimize investor returns.

All acquisition prospects either have management already in place, who will stay with the business after an acquisition, or have strong secondary management that is ready to be promoted and take over as primary management after the acquisition. In addition, it is a requirement that every business owned must have a primary manager and secondary manager in place within 6 to 9 months after an acquisition is completed. Nearly always, the managers are promoted from within the business.

Typically, well-executed business acquisitions offer higher returns, with more growth potential at comparable risk levels to other asset classes. However, actual return rates depend on industry type and acquisition debt levels. For instance, industries like real estate generally yield lower returns than service businesses. Similarly, acquisitions with higher debt ratios present the potential for greater returns but come with increased risk, while those with less debt offer safer, albeit lower, returns.

Returns also fluctuate with changes in interest rates, directly affecting business prices and, subsequently, potential returns. Therefore, we update our website with current expected return rates, regularly reflecting new market data.

In all investments, we ensure transparency so investors can make informed decisions about expected returns compared to their risk tolerance. We also continually engage with our investors to align with their return expectations and risk comfort levels.

The returns structure typically falls into one of three categories, varying from deal to deal. These include:

Income-based returns: This involves a consistent cash flow to the investors, distributed monthly or quarterly.

Growth-based returns: Does not have cash flow. Instead, the cash is reinvested into the business to increase the company's value over time.

Combination of income and growth: This offers a blend of steady cash flow and capital growth.

It also happens that the returns can be convertible. For example, the returns may start growth-based but later convert to income-based once the business reaches certain pre-set milestones.

The type of return an investor receives depends on the deal and financing terms. External factors like bank involvement may also affect the return structure. We aim to accommodate our investors' preferences, adjusting the deal towards income, growth, or a combination of both, as desired.

Today's technology allows investors to generate returns through private business acquisitions without leaving their homes, an opportunity not prevalent a decade ago. Through our system, investors can participate in deals, accessing all related documents, financials, and webinars. Questions can be asked & answered, investments made, funds securely transferred with bank oversight, legal oversight, and proper documentation. Once invested, returns begin to accrue passively, without needing personal management, meeting attendance, or any other active involvement.

The typical investment holding period, during which investors retain their investment, ranges from three to seven years, averaging around five years. This period is essentially a "lock-in" time to reduce transaction costs and allow the business to amass enough cash to buy out investors potentially. Post this period; investors have the freedom to sell their investment anytime or retain it longer if desired, based on the returns or potential of the business.

After the “lock-in” period is passed, investors can sell their investment to other internal partners, the business itself, or, in some cases, external investors. One role of the managing partner is to help facilitate this process, ensuring a smooth and efficient transition.

We prefer maintaining ownership instead of selling the business because owning a business in the long term is typically more profitable. Although selling under specific conditions isn't off the table, we favor sustained cash flow from ownership over lump sum cash from selling.

No, Iron Oak Capital does not charge any fees. We keep it simple, unlike many private equity funds or syndication firms that charge acquisition fees, disposition fees, management fees, transaction fees, monitoring fees, early withdrawal fees, administrative fees, break-up fees, exit fees, and performance fees, such as a share of investors' profits. Our investors don't pay fees and do not share their returns; they keep 100% of their profits.

A new legal entity (LLC, C Corp, etc.) is formed for each acquisition, which technically acquires the business. This new entity has its own capital structure where cash flows in a specific order through the business (known as a "cash flow waterfall"): first, employees are paid, then suppliers, next debt holders, then preferred owners (if present), and finally, common owners. Each level receives a full return before the cash can fall to the next level; this provides security to higher levels.

Investors typically invest as debt holders, preferred owners, or common owners. We aim to position our investors as preferred owners, but this can vary due to deal specifics or loan conditions. For instance, preferred ownership isn't possible with SBA-secured loans, so investors become subordinate debt holders or common owners. We value our investors' preferences and align the deal structure accordingly.

Typically it's one to six opportunities per year. On average, it's around four opportunities investors get to see a year.

Each acquisition we undertake is independent. They aren't classified under Iron Oak Capital or as subsidiaries of any larger company. This ensures safer and more secure transactions by avoiding intertwined capital structures and reducing risk.

They risk the loss of the capital they invested in a particular deal.

Acquisition of private businesses involves a significant risk of loss. Prospective investors should read all documentation and risk disclosures accompanying the offering when deciding whether to invest in an acquisition opportunity.

No, investors are not held accountable for debts or management decisions. As a lead investor and managing partner, the managing partner's role is to guarantee any loans and monitor the management's performance.

The managing partner's earnings come entirely from business ownership. He does not share in investors' profits or charge any fees.

He is the primary investor in all deals; he invests his money, time and personally guarantees loans, thus assuming significant risk. The investor's returns take priority over the managing partner's returns; this structure requires that the investors receive their full returns before the managing partner receives any return.

The managing partner risks a substantial portion of his capital and often guarantees loans associated with the deal. As a result, he is liable and on the hook for 40% to 90% of the purchase price of each acquisition. This significant financial commitment ensures a careful analysis of every investment and alignment with the interests of other investors.

They can click 'Sign Up' to complete a form when ready. Next, they'll set up a brief phone call with us to establish a substantive relationship as per SEC regulations. This call helps us understand their investment goals and answer their queries. After 30 days from the call, investors can view our acquisition opportunities. Post-signup, they will receive regular updates on our activities and deals.

Investors who have joined the partnership receive regular educational videos from Iron Oak Capital about investing and business concepts. When an investment opportunity arises, they are informed and provided with all necessary information for decision-making. They can express their initial interest with a "soft commitment." After completing due diligence, they convert this to a "hard commitment" by transferring funds into an escrow account. This marks the official closure of the business transaction. Within a few months, investors start receiving their investment returns.