Business Investment Lawyers
Businesses can obtain investment in a variety of different ways. In each case, it will be important to record the terms in an appropriate contract.
For example, sometimes investment comes from friends and family in the form of cash, which can be known as “love money”.
Sometimes investment comes from more institutional lenders, such as high net worth individuals investing their own cash, or other equity investment organisations.
An investment may be recorded as a debt (rather like a loan) repayable usually with interest over a fixed period of time. An investment may also be recorded as equity, for example for a percentage of shares in a company or a profit share in partnership. Sometimes an investment may be part recorded as a debt and part recorded as equity. There are pros and cons for each type.
If you are an investor, then before making an investment, it is important to conduct appropriate due diligence to understand the state and health of the business being invested in. Moreover to have an agreement setting out the important principles of the investment. This may include putting obligations on the directors or managers of the target business, taking security, and, where possible, to have a mechanism to exit from the investment.
If you are a business or entrepreneur, looking to raise funds outside of a traditional bank overdraft or standard commercial loan, then it will be important to consider the fundraising documentation. For example, it is possible to dilute existing shareholders, and should an investor be able to exercise control over the business as opposed to just having protection for the investment.
If you are looking to raise or invest funds, then speak with one of our experts today.