Combination loan and investment in business

[lenbias]

I am investing in a friend's start-up business and am looking for legal advice on what contracts are needed and how they should be signed. We have an agreement that I will invest $20k, but haven't signed anything yet. It goes like this:

- $10k will be a straight up investment
- $10k will be a loan to his business backed by a personal guarantee from him

In exchange for this I will get a 3% share of the revenue and a 4% share of the buy-out price if the rights to the product are sold.

So I'm thinking I need two contracts - one for the business agreement and one for the personal guarantee. Is that right? Do these documents need to be drafted and witnessed by a lawyer, or can they be downloaded from a legal doc site and witnessed by any third party? Do they need to be witnessed at all?

We are in different cities. Do we need to both be present to sign, or can he sign and then email/fax it to me and then I sign and email/fax it back.

I am in British Columbia, Canada.

Thank you in advance!

Len

[takeshi007]

It is really a good idea if you combine the loan and investment on our business. Aside it can help to earn money you are be ready for the upcoming problems like bankruptcy and scam.

[MrsCasanova]

I agree with takeshi, it seems like a wise idea.

[Callista Gail]

A transaction consisting of two separate loans for the same borrower by the same lender. The initial loan is used to finance the construction of a new home; upon completion of construction, the loan is repaid by a second loan, which is a permanent mortgage on the home. The initial construction loan is usually an adjustable-rate mortgage, while the subsequent mortgage might be any one of the mortgage types available. The simultaneous use of a first and second mortgage to finance a home. The first loan is usually made for 80% of the home's value and has a first lien position, while the second loan is usually for 10-20% of the home's value and has a second lien position. This transaction is frequently used to avoid having to pay private mortgage insurance.

[Michael01]

I think you should contact a good legal advisor before proceeding.Thanks for such post.

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