USA Equity VS High Interest Rate


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Thank you in advance for your help. I am putting together a business (large campground and glamping campground) that will throw off approximately $1,200,000 after expenses.

At an 8% cap rate I show the business being worth $15,000,000. At 6% ( I can justify 6% based on other businesses in the area) I show $20,000,000.

I need to raise $2,300,000 (approximately). Is a high interest rate (14%) of interest to private equity lenders or must I offer equity in the business at a low interest rate? In other words, I am not sure how to make the offering to accredited investors.

Thank you,
Peter
 
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kirby

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And solving that is exactly what investment bankers do. Plus they have the ability to make the plan happen. So I suggest you head their way.
 
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Something to consider is that the 14% interest expense on borrowed funds will reduce taxable gains. So, the effective interest rate is (14% * (1-tax%)). For example, if the tax rate is 25%, then the effective interest rate is 10.5%.
 

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