But it seems likely to me that their 'investment decisions' are going to be made based on a run-of-the-mill small business credit model which will be heavily revenue focused.
It's a small business loan with terrible terms.
Re:Earnest Capital is live
by tylertringas on Wednesday February 13, 2019 @01:29PM
(#19155357)
We're more of a substitute for seed equity. Or at least that's the lens through which we have structured our terms and strategy. Most of the co's we are looking at would not be able to get a small business loan (zero collateral, very limited financial track record by debt standards, etc)
If the loan in to the LLC then the loan would also go away if the company fails. The difference is primarily the deferred payments in case of non-profitability.
Re:Earnest Capital is live
by bklyn11201 on Wednesday February 13, 2019 @02:19PM
(#19155858)
Acquiring a commercial loan to your LLC with reasonable rates without a personal guarantee is extremely difficult. In all likelihood, a small business is going to have to make a personal guarantee to borrow money.
This seems like a middle-ground that is better suited to starting up companies that most likely won't be unicorns. They only get paid once you get to a "comfortable" spot, financially.
Another consideration may be that in the event of business failure, you'd still owe money on the loan but the Shared Earnings agreement would essentially go away since the business is no longer viable. Not sure about this, but this is what I'd imagine would be the case.