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

submitted 11 months ago by Nivsy_21@alien.top to c/entrepreneur@indiehackers.space

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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

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[–] TO_GOF@alien.top 1 points 11 months ago (14 children)

Going merely off of what you stated:

They want an equity stake in your company, you would own 95% and they would own 5%. They have also valued your company at $600,000. If you take their money you wouldn’t owe them anything but they would be part owner of your company though you would retain full control.

Do you believe your company is worth $600,000? Do you need the $30,000? If you feel your company isn’t worth $600,000 then this might be a good deal. If you need the $30,000 to help you expand then this might be a good deal.

If your company is worth more than $600,000 then it’s probably a bad deal and if you do not need the $30,000 for any reason then it is a bad deal.

[–] betteraccounting@alien.top 1 points 11 months ago (4 children)

Just curious, you seem to know your stuff, would the investor be entitled to profits? Would 5% stake automatically entitle them to 5% of profit?

Or does the investor only make money if the business is sold and he earns out more than he put in? This type of arrangement has always confused me for small companies like this

[–] gimme_pineapple@alien.top 1 points 11 months ago

They are entitled to 5% of dividends. If OP owns 95% of the company, he decides whether the company pays out any dividends so finally it’s up to OP. But all of these matters should be clarified before they sign any documents.

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