An owner of a subway is offering me a 10 or 15% part owner in his business and below is the offer. Is this a wise business investment based on what he stated?
We can structure this an equity deal or a debt deal.
The debt deal would be a convertible zero coupon note payable immediately upon sale of business which could be any day, week, month, but I know for sure before summer 2014. This note is also convertible into an equity stake equivalent to its face value. This is good should the business start to do extremely well and you want to participate in the growth.
Below is the equity deal:
10% at a 5% discount= .10*(125,000)*.95=11,875
15% at a 4% discount=.15*(125,000)*.96=18,000
There is also a 6% option at 5% discount