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Maverick, Lawyer
Category: Real Estate Law
Satisfied Customers: 5749
Experience:  20 years professional experience
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Is a debt instrument issued under Florida law that pays

Customer Question

Is a debt instrument issued under Florida law that pays interest based on a percentage of company revenues subject to usury statues if it ends up paying back 125% of investment back in one year. The note would be subject to a maximum payback (125%), would have no minimum payback, not annual guaranteed return, no accrual mechanism and a maturity date of 3 years (or payment of 125% of investment, whichever comes first).
Submitted: 3 months ago.
Category: Real Estate Law
Expert:  Maverick replied 3 months ago.

Welcome to Just Answer (“JA”)! My name is Maverick.

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If a lending agreement is determined to be a purchase of an equity interest in a venture, then usury laws do not apply and there are no caps on the “return” the purchaser can charge.

Customer: replied 3 months ago.

In this case the actual investment amount would not be for equity per se, but only for the uncertain return. Warrants could be offered if that would affect the status.

Expert:  Maverick replied 3 months ago.

Here is the Fl usury statute. It is relatively straight forward. You would need to structure the transaction to avoid the appearance of an interest rate that exceeds 18% if under $500k is involved. Your idea about issuing warrants may be a good way to get around this.