Repaying small investors

[BrianZbrew]

I was looking at different ways to startout. I can cobble together enough money to get what I want going and have a few small guys wanting to invest $1,000 to $2,500 and a couple people with $10,000. I know that they all expect a return on the investment. The individual with $10,000 wants 12% on the money in two years. In regards to the smaller investors has anyone presold the product? For the investment of $1,000 to $2,500 they get this amount of goods and services. It is kind of like a CSA, consumer supported agricultural deal. The consumer takes part of the risk along with the farmer. If it can work there why not here? I thought it was an interesting concept. Any feedback would be appreciated. Thanks.

[HubCity]

My suggestion would be to try to avoid these type of investors. While the extra $20k may be a nice boost to any other loans it may end up being a major headache in the long run. You may end up with people that feel you are obligated to them past the point of established repayment. If you do use these small term loans make sure to have legal documentation that covers your repayment schedule.

Personally I would stick with banks if at all possible as they may be a bit more understanding if you are not able to generate a cash flow immediately. I would also hate to be giving away product as repayment when it could be used to generate income.

As to the CSA's you mentioned they are usually a bit more beneficial to the consumer if I remember right as they get a reduced rate while the farmer really only gets a guaranteed sale. I might be a bit off on this as it's been a while since I dealt with ag investments.

[AlexisScarlett]

Another structure is a cooperative. There are co-op's that serve consumers like food co-ops or electrical co-ops where you band together to get goods or services.
Beer co-op in Austin Texas-- Black Star at www.blackstar.coop
There are producer co-ops where you band together to create a market or buy equipment like flour milling co-ops or seed co-ops
There is a co-op owned brewery in Olathe KS but being reformatted right now as the producers grew corn and soybeans for the beer.

All the members own the co-op and the returns are benefits and the gov't is very kind with the tax structure. One avenue....