Long story short, the business I’ve been managing for past several years for an absentee owner has fallen into a hole of debt from another industry related endeavor the owner had tried to get into and failed. It’s left me in the position of needing to find a new career path

One of my long time customers offered to invest with me to start my own business in hopes we can maintain some of the previous customer base.

I have all the tools and knowledge to get the jobs sold and finished but need about $25k to fully start off in the manner I would like so I can maintain the same professionalism my customers have become accustomed to. I project to gross around $200k in the first year with a 65% gross profit.

My investor has offered the loan at no interest, want 35% equity as a yearly distribution, hands off with the business. He also brings to the table a much more powerful sense of business than I myself possess, a rolling line of interest free credit, and bookkeeping/admin/marketing help. Our goal is to grow the business in a scale that will require amounts in the 6 digits in the future and our deal is to restructure our percentages at that time as profits grow. But loans remain interest free.

I feel like 35% is nothing with the resources I’ll have available to me as a new business owner. But also recognize the power that removes from myself going forward so I’m looking for others thoughts?

  • mattpga@alien.topBEnglish
    1·
    10 months ago

    His 25k is an interest-free loan. So you’re giving him 35% equity for the amount of money you’re saving on interest (plus whatever his advice is worth to you).

    You could get a personal loan from Discover right now for up to $40k. Interest rate depends on your credit score, but let’s say 19.9%.

    If borrow $25k and repay that over 48 months, your total interest paid is $11,500.

    If you believe in yourself, the numbers make sense to get a personal loan.

    Or negotiate that the 25k isn’t a loan - it’s an equity investment. He’s putting in money and you’re putting in effort. Then the 35% equity might make sense, especially if he’s also an advisor.