Entrepreneur

0 readers

1 users here now

Rules

No Personal Attacks - criticism of ideas is allowed, attacking people is not.
Self Posts Only - links can only provide supplementary material. Your post must contain enough content to have a discussion.
No “How To Get Rich Quick” posts - This community is not about making a quick buck. Posts asking the community how to make $X, without making specific reference to a reasonable idea, are not tolerated.
Avoid unprofessional communication - Please treat fellow entrepreneurs like respected coworkers, label conversations if NSFW and avoid deliberate provocations.

Please feel free to provide evidence-based best practices, share a micro-victory, discuss strategy and concepts with a frame work, ask for feedback, and create professional conversation. Treat every post as if you're at work and representing the best version of yourself.

founded 10 months ago

MODERATORS

communick@indiehackers.space

Had an offer for someone to invest $30,000 for a return of 5% (alien.top)

submitted 9 months ago by Nivsy_21@alien.top to c/entrepreneur@indiehackers.space

47 comments fedilink hide all child comments

Someone wanted to invest 30k into my landscape company for 5% return, now I’m not the smartest guy out there and someone is free to correct me if I’m wrong but shouldn’t that 5% be until the loan is paid off and not until I give the company up

Again I’m very new to this so I could be looking at this horribly wrong

you are viewing a single comment's thread
view the rest of the comments

[–] founderscurve@alien.top 1 points 9 months ago

well investment is different from loan, though they can overlap.

if they are investing 30k for 5% they they believe your business is worth 600k in value (they believe if you try to sell your business it will sell for 600k) - if this the route they are offering, they would own 5% of your business, and be entitled to 5% of any dividends you pay to shareholders (if you pay profits to the owners of the business), when you sell, they will be entitled to 5% of whatever the business ends up selling for.

If its a loan - then they might be saying the'll lend you 30k, and you have to pay back 30k + 5% (1500) - they would not own part of your company.

the third scenario is where they lend you 30k as a loan, but once it reaches a certain point it would convert to equity (i believe called a convertible note, but check as not my area of knowledge)

assuming its equity - you need to determine if 600k is a realistic value for the business, and if you want this person involved in your business, you should speak with a lawyer.

next, you should also consider if you need the 30k, and if there are better alternatives (e.g. borrow from the bank) to get that 30k.