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You consider the net being divied under whatever schedule negotiated to be going towards paying back the principle. + whatever multiple (1.5x, 2x, etc) you agreed upon to ensure the loan.
$2mil @ 2.33x 30%net would be 30% profit returned until $4.66mil repaid.
Look, the details of the arrangement hardly matter. The point is whether the lender expects more back than what he lent.
Interest comes from the simple fact of time preference. Would you rather have $100 today or $100 in a year? Would you rather have $100 today or $200 in a year? At whatever point you decide to wait a year is your personal rate of interest for $100. Whatever the market rate of interest is is simply the rate at which the market for lending/borrowing clears.
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[–] ihaphleas 0 points 2 points 2 points (+2|-0) ago
No. Do they consider the loan repaid after the principle is paid back? Or do they have a continuing interest in the business?
[–] virge [S] 0 points 1 point 1 point (+1|-0) ago
You consider the net being divied under whatever schedule negotiated to be going towards paying back the principle. + whatever multiple (1.5x, 2x, etc) you agreed upon to ensure the loan.
$2mil @ 2.33x 30%net would be 30% profit returned until $4.66mil repaid.
[–] ihaphleas 1 point 0 points 1 point (+1|-1) ago
Look, the details of the arrangement hardly matter. The point is whether the lender expects more back than what he lent.
Interest comes from the simple fact of time preference. Would you rather have $100 today or $100 in a year? Would you rather have $100 today or $200 in a year? At whatever point you decide to wait a year is your personal rate of interest for $100. Whatever the market rate of interest is is simply the rate at which the market for lending/borrowing clears.