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How to structure terms of repayment of investor loan?

I am buying into an existing company, in which I will also assume an important C-level position. The arrangement is that I will invest my money over 6 months. We are stuck on what happens if at the end of the 6 months we decide to part ways. I want to be repaid within a fixed period of time (6-12 months), but the company does not want to be tied down to any time limit for repayment. Do you have any other ideas as to how to structure this part of the agreement?

5 Replies

Steve Simitzis
1
0
Steve Simitzis Advisor
Founder and CEO at Treat
Typically you would do this as a convertible note, and not expect to be repaid.
Neil Gordon
0
0
Neil Gordon Advisor
Board Member, Corporate Finance Advisor and Strategy Consultant
If we presume the ability to pay, at least at some time or another (i.e., you have an expectation of payment), then the range of payment options is something like the following:

On your demand. In this case, we know that won't fly.

In periodic, timed payments. They've rejected that one.

In periodic payments, timed to liquidity of some sort or another, e.g., revenues, profits, cash flow, sale of securities or assets. That might be your middle ground.

As the company's discretion. That doesn't work for you.
Paul Lange
0
2
Paul Lange Entrepreneur • Advisor
Brand Loyalty & Customer Experiences Trainer | Financier | Investor | People, Planet, Profits with Purpose
RED FLAG!!! OK, I'm going on the minimal info in the message and based on that IMHO you are being overly generous. I'd want the investment back with interest at the time of parting ways, and i they are unable to do that the interest would increase and continue until repaid. I'd also slap caveats on the company from day one! Sounds like a lack of trust from both sides, especially theirs P. -- PAUL J. LANGE *Where entrepreneurs go when they want assured results!* [removed to protect privacy] | URL: http://www.paullange.com.au
Trudi Schifter
0
0
Trudi Schifter Entrepreneur
Founder and CEO at AquaSPE AG
There are two different topics here that in my view you can not mix up. One is whether you are willing to invest in the company, the other is whether you decide to stay working with them after 6 months that has many other factors than return on your $$. Either may a convertible loan or do not, if they need a loan they need cash, so repayment is normally never done, it is converted to shares and since the terms of conversion are determined in advance is considered an investment round that should/must give all investors the same rights. Another way would be to work for free for 3-6 months, and take your pay in shares. Then you should know enough to feel comfortable to either stay or invest.
Lawrence Katz
0
0
Lawrence Katz Entrepreneur
Director at Omnisystems Engineering Consultants
I guess you should look at the original agreement and follow the exit plan. If you did not have one.....big investors mistake
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