Covenants & Conditions
Be very careful. These spell out just what you can and cannot do. No management or ownership change, quarterly filing requirements, no borrowing from anyone else, deposits maintained, collateral pledges, etc. Carefully read and evaluate the fine print. Here is another good place to consult your attorney.
What % Ownership You Will Offer
What’s fair? 80%, 50%, 20% I can’t tell you. You must define it, support it, and defend it While most lenders won’t ask, most investors will demand. Be prepared from the start. Do your homework on your potential funding sources and know what your company or idea is worth.
Stock Repurchase Agreement?
What happens if you hate your investor? Are you locked together forever? Try to negotiate escape clauses that will allow you a way out if you need it or can afford it. Be able to buy your stock back at a predetermined price, if possible.
Most entrepreneurs are in business to make decisions for themselves. Some investors want a partnership. Once again, pre-plan, know what you are looking for and what you are willing to give up.
Will you risk it all? If you don’t believe, neither will anyone else?
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