If you’re looking to grow as a company, you can attract investors. Below, we’ll discuss a number of ways in which investors can invest in your business, and the pros and cons of these procedures.

Loan

The easiest way to raise money for your company is by lending. This can be done at a bank, but you can also get a loan from other companies or private individuals. In return, the person lending the money will charge an interest rate. This is usually a fixed interest rate, but it can also be linked to your profit or turnover, for example.

When you take out a loan when you’re only just starting out, the lender will often ask you to personally guarantee the debt. This means that, despite the fact that the BV (private limited company) is a legal entity, you’ll be personally liable for the debt.

The big advantage of lending money is that you don’t give away control of your company. In addition, in the case of a fixed interest rate, you’ll know exactly what costs will incur. On the other hand, investors will be less likely to invest larger amounts of money because they don’t share in the potential profits on their investment if the business grows.

Convertible loan

A convertible loan is a loan that can be converted into equity in the BV at a certain time and under certain conditions. The investor doesn’t get his money back, but receives equity in the BV when the loan is converted. This construction can be very interesting for both the investor and shareholder.

The big advantage is that the investor also benefits from increases in the value of the company, should they occur. And the investor can also choose to get his investment back if the company’s value doesn't increase.

A convertible loan also has advantages for the BV. The investor has a financial interest in an increase in the value of the company and will therefore probably be more involved in the company. In addition, although issuing equity results in less control of the business, it also means that the loan doesn’t have to be repaid. This puts less financial pressure on the company.

As we wrote in the article ‘Allowing employees to share in the profits via STAK’, you can opt for a STAK (trust office foundation) to avoid having too many people with voting rights in your company. Putting convertible equity in a STAK can therefore be a good option.