[SFC]

Can someone explain this to me: If a merchant has access to a bank account, bank login etc. And he's on the k1. Why does the percentage that he owns matter? What's the difference between 34% and 50%

[WestCoastFunding]

Can someone explain this to me: If a merchant has access to a bank account, bank login etc. And he's on the k1. Why does the percentage that he owns matter? What's the difference between 34% and 50%

Neither is majority ownership.

[DTFdowntofund]

Majority ownership is liable for the financing and the terms of the contract should the deal go sour. Legality red tape basically.

[SFC]

Majority ownership is liable for the financing and the terms of the contract should the deal go sour. Legality red tape basically.

So every funder requires 51% or more?

[WestCoastFunding]

So every funder requires 51% or more?

Can’t think of any that accept less other than CAN Cap

[ryanh]

Business backer does 1%

[SFC]

Business backer does 1%

What's the logic behind this?

[SFllc]

LoanMe does 25%

[A+Paper]

Technically, 1% is fine if they have a corporate resolution that says they are the managing member and can speak for the entity.

[Nunya]

What's the difference between 34% and 50%

16%

[ADiamond]

Can someone explain this to me: If a merchant has access to a bank account, bank login etc. And he's on the k1. Why does the percentage that he owns matter? What's the difference between 34% and 50%

Ultimately, the only reason it really matters and why most lenders/funders require majority ownership is that majority ownership in a company has a controlling interest, and the ability to take on liabilities/debt (legally) for said company.

Now, really when it comes down to it - IF the only reason behind requiring this becomes a reality - which is when another owner of the company fights back and says that SAID COMPANY LLC is not responsible for this debt, because 50% OWNER MERCHANT who took the debt had no right to sign for it - then through the legal system I've seen firms fight this and end up getting the person who took the funds to pay, which he may end up being liable for personally OR it would have to come from HIS 50% or less interest in the company, not the other % ownership interest.

BUT - that is a rare occurrence, and an even further rare occurrence is having an employee / someone else commit fraud and take out advances/loans/debt by providing fake ownership or other documentation - because they have control over the SAID COMPANY LLC bank account - and can do so, so that answers your question more directly.

While rare, it does happen - so what if it happens when you're dealing with a $100k+ deal? or even $50k is a lot of money to most, but still - that's why most lenders/funders are so anal about it, better safe than sorry.


So on the flip side - why do some lenders/funders not require majority ownership? As some here have said - Can Cap, TBB, LoanMe - I believe this is because their product is actually a "loan" and the person signing for it is actually personally liable ultimately if it doesn't get paid. So they don't care and the instances of even having to deal with a default in this manner is slim for them but if they had to they know they'll eventually get paid by the signor personally, if not commercially - which I've see happen as stated above through the legal system - if a guy took the debt and it defaulted and he didn't have authority and only had, say 33% - then technically his 33% interest in SAID COMPANY LLC is liable to pay no matter what.


Other than that, when lenders/funders fund into publicly traded companies or a situation where the person(s) signing for the advance has less than majority ownership combined - there is always an operating agreement or addendum in the by-laws or board authorization writes approval - that said signor(s) have the authority to take on this debt/liability for SAID COMPANY LLC.

[Jfree1121]

The Business Backer does 1% ownership as long as you can prove it (game changer). Same with their LOC product on Headway Capital.

[mishatbb]

The Business Backer does 1% ownership as long as you can prove it (game changer). Same with their LOC product on Headway Capital.

And most of the time can confirm via SOS or various other vendors we have, so don't require ownership stips too often

[DTFdowntofund]

And most of the time can confirm via SOS or various other vendors we have, so don't require ownership stips too often

Schedule C / K1 or articles of incorp isn't a tall order though...

[ryan $]

A Corp Resolution in most cases will suffice. Sometimes Stock is Spread Out so thin that youd need 200 people to sign one contract to get 25% (sometimes more)

[FUND3R1]

Can’t think of any that accept less other than CAN Cap

I'm pretty sure Yellowstone just needs an EIN Document.

[Joe Kinder]

All we need is a EID Doc

[WestCoastFunding]

I'm pretty sure Yellowstone just needs an EIN Document.

While they need an EIN document, they need majority ownership representation to be on the contract.