| Although much of our articles have focused on bank | | | | they are receiving a percentage of the business rather |
| and finance company issued loans, this next article will | | | | than simply an interest payment on the outstanding |
| focus on the issues that come with obtaining a loan | | | | principal balance. As such, and as with any business |
| from a private individuals. For many small business | | | | agreement, have a clear and decisive contract that |
| owners, entrepreneurs from time to time, will look for a | | | | clearly showcases how much money you are |
| business loan privately rather than going to a financial | | | | borrowing, the fact that you are borrowing the money |
| institution. However, you should be aware that the | | | | rather than selling a percentage of your business, the |
| interest rates associated with these loans often carry | | | | term of the loan, and the interest rate that will be |
| a higher interest rate (assuming that the transaction is | | | | applied to the loan. It is also maybe very helpful for you |
| "arms-length"). | | | | to have a full business loan amortization schedule built |
| | | | | into the promissory note contract so that it is even |
| More often than that not private investor loans are | | | | more clear that this is in fact a loan rather than an |
| often referred to as promissory notes. This, much like | | | | equity investment. |
| any other business loan agreement, is a contract | | | | |
| between you and a lender. This term is also often | | | | If you are having issues drafting a promissory note |
| used among borrowers that do approach lending | | | | then it is imperative that you speak to an attorney that |
| institutions for their debt capital needs. When | | | | can assist you in this process. Even if you are very |
| negotiating with a potential private investor for a | | | | well versed in contracts, it is still highly advisable that |
| business loan – you absolutely must make clear | | | | you seek appropriate legal advice when developing a |
| that what you are seeking to obtain is a business loan. | | | | contract with a private investor who is providing you |
| In some instances, there have been issues where | | | | with debt or equity capital. |
| private investors who provide debt capital believe that | | | | |