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
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.