I had a client I've worked with before approach me for a follow-on project. They're strapped for cash at the moment, but had been perfect with payments on time in previous project that lasted 10 months. They'd like to defer some of the costs of development for a period, which I can sympathize with, but I'm not a bank and am fairly naive over the terms offered. Anyone have an opinion (ha! In this crowd, has anyone got an opinion -- what a funny guy!) on whether this is ever a good idea or gotches on these terms:
Time billable at $X.00 / hour Compensation split One-third = cash payable monthly NET 30 Two-thirds = convertible, unsecured 90-day note at Prime + 3% Each 90 days, client will pay interest due and roll note over for another 90 days or offer the choice of the following options - payment in full of all principal and interest due - conversion to equity at the rate of $XXk owed = 1 % equity (or fraction thereof) I don't think it's such a good idea to get into the loan business myself. But I'd welcome comments if someone has done this with clients to hear how it worked out. The red flags for me include "unsecured", options appear to be at the client's discretion (getting the client to clarify the options here) and conversion to a minority shareholder. Obviously, if the business goes Google, that could be gigabux, but the reality is that's it's more likely pennies on the dollar, or nothing... _______________________________________________ Post Messages to: ProFox@leafe.com Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
