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Preferred Stock
What It Is: Equity structured with priority rights over common shareholders, often utilized in various investment strategies for effective capital raising.
Required: Creation or amendment of a preferred equity class, defined liquidation preference (typically 1x–3x invested capital), anti-dilution and protective provisions, updated cap table transparency, and governance rights (as negotiated).
Note: The company valuation must support the preferred structure and risk-adjusted return expectations, especially in the context of business loans.
Personal Guarantee
What It Is: A legally binding agreement in which the founder personally guarantees repayment under defined default conditions, often necessary when seeking business loans for capital raising initiatives.
Required: Signed personal guarantee agreement, satisfactory personal financial review, defined repayment triggers (default, insolvency, covenant breach, etc.), and a minimum net worth threshold sufficient to support guarantee coverage.
Note: Guarantee approval is subject to financial capacity review and risk assessment, especially in the context of investment strategies.
Commercial Guarantee
What It Is: A company-backed obligation to repay capital, independent of equity performance, often utilized in various investment strategies, including business loans and capital raising efforts.
Required:
- Board-approved corporate resolution
- Defined repayment schedule or performance milestones - Minimum revenue or asset coverage ratio
- Security agreement and UCC filing when applicable
Note: The company must demonstrate sufficient revenue stability or asset base to support guarantee obligations.
Founders Collateral
What It Is: The founder pledges personal or business-owned assets to secure the investment, which is a crucial aspect of effective capital raising strategies. To qualify as acceptable collateral for business loans, these assets must meet a minimum value threshold, typically exceeding the invested capital coverage requirements. Additionally, an independent valuation or appraisal may be required, along with a clear title and lien position. An executed security agreement and necessary legal filings are also essential.
Note: Only verifiable, transferable assets are considered acceptable collateral.
Business Collateral
What It Is: The company pledges business-owned assets to secure invested capital, thereby providing ABC Angels a secured position in the event of default. This collateral arrangement is crucial for effective capital raising and investment strategies.
Required:
- Collateral must meet minimum coverage threshold relative to capital invested
- Verified ownership and clean title
- Independent valuation (if required)
- Executed security agreement
- UCC filing or appropriate lien documentation
- Defined default and recovery terms
Note: Assets must be verifiable, transferable, free of undisclosed senior liens, and demonstrate sufficient recovery value.
Royalty / Revenue Participation
What It Is: ABC Angels receives a defined percentage of revenue until a predetermined return multiple is achieved, making it an effective approach for capital raising.
Required:
- Minimum revenue baseline or credible revenue forecast to support the viability of business loans.
- Clearly defined gross or net revenue calculation method to ensure transparency in investment strategies.
- Contractual payment schedule (monthly or quarterly) to facilitate structured repayments.
- Reporting access and audit rights to maintain oversight of financial performance.
- Defined return cap (e.g., 1.5x–3x invested capital) to limit investor exposure.
Note: The structure must demonstrate a realistic ability to generate revenue sufficient to service payments.