Is This Possible? Company shares as collateral?

[AikFrank]

Is it possible to offer some percent of your Company's shares to a lender as a collateral? How can this be done?

What if the lender sees the project and he is confident that the business can repay back within the stipulated time, is this possible, what are the possible risk for both parties.

Thanks for your kind responses.

[1713524717]

1713524717

[1713524717]

1713524717

[LFC_Bitcoin]

I don’t think it’s going to be seen as a valid collateral, certainly not without meeting face to face & signing some kind of written contract or something.

It’s too messy & would require a lot of trust on both sides. It’s not something I’d consider but others may disagree.

[AB de Royse777]

~snip~
It’s too messy & would require a lot of trust on both sides. It’s not something I’d consider but others may disagree.

I will be on the same page like you. This is a strange place where we have no idea about the other side however if the other side is highly reputable then may be there is a chance.

[DireWolfM14]

It wouldn't be much different than a typical investor's agreement contract.  There are lawyers who specialize in writing up such contracts, or you can buy a generic template.  You might even be able to find one for free download on the web.  I would speculate the generic ones can be risky, and risk assessment would largely depend on the value of the contract.

I don't see why the contract couldn't be written defining the investment to be made in crypto, but that might add risk.  The investment could be made in fiat, and the company can then convert that to crypto if that's whats needed.  That might help the investor in case a court battle ever ensues.


ETA: If I were going into something like this (hypothetically) I would want to scrutinize the piss out the company in question.  Full financial statements, tax records, liens, loans, assets, liabilities, income, expenses, back-ground checks...  The whole bit.  The expense of doing all the research and securing the investment is usually paid by the investor, so it would have to be worth it in the long run.

[ThatRandom8543]

Is it possible to offer some percent of your Company's shares to a lender as a collateral? How can this be done?

What if the lender sees the project and he is confident that the business can repay back within the stipulated time, is this possible, what are the possible risk for both parties.

Thanks for your kind responses.

The thing is, its not valid collateral. In reality, using shares/interest/ownership of a company as collateral, in my own opinion, is the same as future income, which isnt valid here. The general problem with what youre asking is that most companies that ask for a loan using shares as collateral, specifically startup or low revenue companies, are usually not profitable. So if the company default, the lien that is on the ownership doesnt promise they would recover their money since the company could end up being bankrupt by then. On top of that, it requires the lender to review everything about the company and when I mean everything, I mean everything leaving no stone unturned. Also, it would require an attorney to draft agreements (never use a generic agreement in this case) as well and for them to also review state,federal or some government statute in regards to what is allowed to be done with a private entity using its ownership as collateral. Some statutes dont prohibit it while some usually do depending on the structure.

My advice is not to even bother with using ownership of a company as collateral in any sort of loan deal until the company is generating a large sum of revenue and showing some form of realistic profit. Youre better off getting a loan at a bank with your house as collateral.

[Patatas]

Is it possible to offer some percent of your Company's shares to a lender as a collateral? How can this be done?

Technically, you need an investor and not a lender. Only they are able to take your idea/product into consideration and give you money as venture capitalists. They definitely take interests and company shares just like you expect. However, lenders on bitcointalk will have zero clues about the future of your company or product or the market to take that risk. Company shares can be valid collateral if they a high value in the market already just like a very good alt-coin.