Sounds like pref equity with a 5% coupon or could just be a 5% hurdle. If you need capital but don’t want to be squeezed by interest on bank debt you could structure this as PIK interest so it doesn’t require any service in the interim. Way too little info here to actually know what is being proposed though.

As someone who works in the lower MM PE space and sees plenty of businesses this size, QB is the norm (and also perfectly acceptable to a buyer if you’re ever looking to sell). I recognize I’m not a fellow entrepreneur but I hope that perspective is helpful.