Budgeto does not offer financial-guidance about how to manage cash in or out of your company. Questions such as how to return money to your investors should be discussed with your accountant, financial advisor, mentor, or any other qualified professional. Although we do not provide guidance in this field, here are some suggestions on how to return money received from investors.
The word “investor” is often used at large. It is meant to describe individuals or corporations which have “Invested” or “lent” money to your company. Friends or family members may invest or lend money to a sole owner, but in all cases, they are engaged into a financial transaction with your company.
Depending of what were the terms and conditions of such “investments” they might want to see a “return on their investment(s)”. This all depends if the initial investment was done in the form of a loan (with interest or not), a convertible note, or a straight equity investment. Such investment(s) should be found easily on the section “Debts” or “Share Capital” in the “Funding” menu of Budgeto. It is recommended that the investor and your company are very clear as to what are the expectations in terms of return on money invested, as well as what is the timing associated with such an investment.
In short, money could be returned to investors as follow: (non exhaustive list)
- Partial or full repayment of a loan (with or without interest).
- Dividend payment to all shareholders of the corporation (including the founders, if the company is able to make some dividend payments).
- Full sale of the shares of the company owned by the investor to an acquirer (M&A Exit). In the case of an equity investment (2. and 3.), it is very important to know exactly what are the number of shares and percentage owned by each shareholders of the company.