I had a few guys offer to buy some share of my company if the money was allowed to reamin in an account and only be used for collateral. I didn't see the purpose of it and I haven't asked anyone to buy shares. Okay so whats going on? They said its something they have be doing for a few years now and it's to help new businesses establish credit sooner than it otherwise would. They are wanting to put the money into some interest earning account, some type of government bond, for 10yrs. Their plan is to let me use it as collateral while it earns interest? But heres the catch, they claim that the shares they hold will be worth the amount in the account divided by the number of sahres (dont think thats true - but okay). Over the next ten years they are betting that my shares will be worth more and that I can afford to buy them back at the value they would be on the tenth year minus the money in the account.
Okay, it's not what I want to do, so I asked the what if questions.
what if my company fails to increase in value?
A: after 10yrs the money would be withdrawn and not be eligable as collateral and we walk away.
what if I have a loan(s) against the collateral and you yank it?
A: you won't beable to. The bank knows it is only available for 10yrs, they won't lend beyond 7.
so, if the loans are paid back and the shares are only worth what you paid 10yrs earlier, then what?
A: we had you back the shares and withdraw the money from the account and walk away.
Why would you do it, it sounds unreasonably risky for you?
A: the government bond(s) will have matured by then and you are not going to beable to do worse than $0. So if your business doesn't grow we lose nothing and walk with the face value of the bond.
But your betting that if I barrow against your money, I will not default on a loan(s) and cause the lender to collect, thats an awful lot of faith for someone you don't know and haven't even ask me about business, Thats the part I find so risky, How can you be certain that I wont default on the loans?
A: 2 reasons, 1 the money is pledged to 5 other start ups as well we're actually betting 1 of them will out perform any loses. 2 if you default we purchase the debt and work out an installment plan.
Okay, whats wrong with this picture?
Is what they are doing even legal?
Is this some method for debt buyers to actually create opportunities for themselves?
this offer came out of no where and It's nothing I was or will consider.
Anyone ever heard of this?
Just had to ask "I already exposed my hesitation to trust in my other posts"
so just in case I'm letting my suspisions run wild again, does this raise any warning flags with any of you?
Thank In Advance
James
Okay, it's not what I want to do, so I asked the what if questions.
what if my company fails to increase in value?
A: after 10yrs the money would be withdrawn and not be eligable as collateral and we walk away.
what if I have a loan(s) against the collateral and you yank it?
A: you won't beable to. The bank knows it is only available for 10yrs, they won't lend beyond 7.
so, if the loans are paid back and the shares are only worth what you paid 10yrs earlier, then what?
A: we had you back the shares and withdraw the money from the account and walk away.
Why would you do it, it sounds unreasonably risky for you?
A: the government bond(s) will have matured by then and you are not going to beable to do worse than $0. So if your business doesn't grow we lose nothing and walk with the face value of the bond.
But your betting that if I barrow against your money, I will not default on a loan(s) and cause the lender to collect, thats an awful lot of faith for someone you don't know and haven't even ask me about business, Thats the part I find so risky, How can you be certain that I wont default on the loans?
A: 2 reasons, 1 the money is pledged to 5 other start ups as well we're actually betting 1 of them will out perform any loses. 2 if you default we purchase the debt and work out an installment plan.
Okay, whats wrong with this picture?
Is what they are doing even legal?
Is this some method for debt buyers to actually create opportunities for themselves?
this offer came out of no where and It's nothing I was or will consider.
Anyone ever heard of this?
Just had to ask "I already exposed my hesitation to trust in my other posts"
so just in case I'm letting my suspisions run wild again, does this raise any warning flags with any of you?
Thank In Advance
James
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