I've seen similar before. It's legal. They are welcome to propose anything that's legal. You're welcome to not accept their terms. It really comes down to how

I've seen similar before. It's legal. They are welcome to propose anything that's legal. You're welcome to not accept their terms. It really comes down to how much leverage you have. Do you have other investors? If their equity percentage is low, then you could almost think of it as a loan with interest paid in equity. If it's high, you might think their terms are not reasonable. Good luck!