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Is there such a thing as a "standard" interest rate? One of the main factors in determining the rate on a loan is the risk of default. For a newly incorporate
by agmiklas 16y ago
Is there such a thing as a "standard" interest rate? One of the main factors in determining the rate on a loan is the risk of default. For a newly incorporated company -- that's going to be high.
Both partners might work as hard, but they don't share the same risks. One has put X thousand more into the business, and they should be compensated for that additional investment. The fairest way to do that is to consider what terms you'd find reasonable on an investment of similar risk.
- zyfo 16y agoThe way I understood Spolsky the IOU was between the founders, i.e. it would even apply if the company went bankrupt. If that is the correct interpretation, they share the same risk. I re-read the entry and it isn't clear to me if Spolsky thinks the IOU should be there even if the company ceases to exists. Me and my two co-founders had a similiar arrangement, albeit with very small amounts, and after the company died they paid me back the unofficial loan. We were all students and I happened to have some more disposable money for initial investments (under $3000 though).
- bruce511 16y agoThe IOU should be from the company to the person who puts in the money. The interest rate agreed upon should be balance to the risk.