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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8766
Experience:  30 years of corporate, litigation and international law
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We are a startup company that wishes to raise money under a

Customer Question

We are a startup company that wishes to raise money under a Red D filing. What is the best instument to use. Ex Debt note, perferd stock, common stock, convertible debt note??
Submitted: 2 years ago.
Category: Business Law
Expert:  Richard - Bizlaw replied 2 years ago.

bizlaw :

The best option for the company is either common stock or preferred stock. These do not have a fixed repayment obligation which improves the cashflow of the company. The preferred stock probably means you give up less total equity but if there are fixed dividends you impose a cashflow burden on the company. Persons buying the stock would probably prefer a debt that is convertible as that gives them creditor status with the right to convert to equity if things go well. What is ultimately selected is a function of what you think will get the best result for your particular company.

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