Silent investor questions

[marindependent]

Negotiate with them to get the best deal that you can.

I would probably not want to give them a portion of the business unless there was a significant chance the business would not make it. If business failure was a significant potential, than it might be in your best interest to give this away rather than interest.

For most insurance agencies though, especially if you have cash flow, a loan might be preferred.

That all being said the silent investor will have their opinion.

 

[Lawsonhj1]

I would hope I wasn't doing commission splits with an unlicensed person so If I think silent partner there is an entity formed and paid through the entity otherwise if things go bad the investor might not be silent much longer.

 

[DHK]

How do i compensate a silent investor that is strictly being used as a loan? pay back loan plus interest? or % of the business? or any other suggestions?

LostDollar was correct. Treat investors as a investor and treat lenders as lenders.

Figure it out and draw up a proper agreement along with the exit "buy out" clause so you can pay them off and buy them out at any time.

Either they accept or they don't.

 

[Lesliet123]

Thanks for this!

 

[LostDollar]

And clearly, that wasn’t very intelligent.

I don't think that is a correct statement.

I suspect you are not privy to the restaurant owner's business experience and current life situation at the time of the asset transfer, so I don't believe you are in a position to place your value judgement on his decision.

I don't believe predatory greed is the sole extant driver of human choice and action.

 

[tikibarrister]

My point is that investing in small businesses is extremely high risk. You invest in 10 and expect 9 or 10 to fail. The one that makes it has to provide an ample return for all 10.

Just getting interest on a loan won’t do it. You need a piece of the action.

In most deals of this nature I’ve seen, the investor gets his money out first and then shares profits.

There are a million good ideas and ambitious people. Investors are a lot rarer. They have a right to expect a high return for high risk.