{"id":13927,"date":"2019-09-23T00:00:00","date_gmt":"2019-09-23T00:00:00","guid":{"rendered":"https:\/\/lawants.com\/equity-loans-an-attractive-financial-hybrid-for-start-ups\/"},"modified":"2026-04-17T09:05:39","modified_gmt":"2026-04-17T09:05:39","slug":"equity-loans-an-attractive-financial-hybrid-for-start-ups","status":"publish","type":"post","link":"https:\/\/www.lawants.com\/en\/equity-loans-an-attractive-financial-hybrid-for-start-ups\/","title":{"rendered":"EQUITY LOANS. AN ATTRACTIVE FINANCIAL HYBRID FOR START-UPS"},"content":{"rendered":"<p>When it comes to finding alternatives to fund entrepreneurial projects, tax advisors are often asked which are the instruments at the investors\u2019 disposal. An attractive alternative are equity loans.<\/p>\n<p>Equity loans are a particular kind of loan in terms of its features as well as their legal and tax treatment. They are loans by virtue of which the lender grants a certain amount of capital to the borrower, at interest, but with certain particularities that distinguish them from what would be an ordinary loan:<\/p>\n<ul>\n<li>They are a liability for the borrower and are treated as external funding from an accounting standpoint.<\/li>\n<li>They accrue, imperatively, a variable interest, which means that interest is based on factors that are inevitably variable such as: net profit, gross income, the company\u2019s equity, etc. In addition, the parties may also agree upon a fixed interest.<\/li>\n<li>As they remain an accounting and tax liability for the borrower, the amounts paid by way of interests are fully deductible.<\/li>\n<li>They are not object to early payment. In fact, it is prohibited by law. Also, the parties may also agree on further penalties in such event. This is in order to protect the company\u2019s ordinary creditors\u2019 interests.<\/li>\n<li>For the purpose of the corporate legislation they are considered as equity of the borrower.<\/li>\n<li>They rank last in the hierarchy of claims and are subordinated to the ordinary creditors of the borrower.<\/li>\n<\/ul>\n<p>They are a very versatile and flexible instrument for both parties when it comes to joining forces when it comes to launching and developing an entrepreneurial venture.<\/p>\n<p>On one hand, it\u2019s attractive for the lender as it allows him to take part in the project, participating economically (and relatively risk-free) in its growth without having to get actively involved in the borrower\u2019s corporate structure; the downfall is that they rank last in the list of claims.<\/p>\n<p>On the other hand, this instrument allows the borrower to obtain quality external financing without the need to allow the investor in its capital and decision-making. Also, the accrued interests are fully deductible in the borrower\u2019s tax returns.<\/p>\n<p>Finally, and this is where the real advantage of this instrument resides, the equity loan is considered as an item of the company\u2019s equity (regardless of its strictly accounting treatment) in the mercantile legislation, having its consequences in the fields of mandatory company liquidation, transformation from a Corporation to a Limited Liability Company, among others.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When it comes to finding alternatives to fund entrepreneurial projects, tax advisors are often asked which are the instruments at [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/www.lawants.com\/en\/equity-loans-an-attractive-financial-hybrid-for-start-ups\/\">Read More&#8230;<span class=\"screen-reader-text\"> from EQUITY LOANS. AN ATTRACTIVE FINANCIAL HYBRID FOR START-UPS<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_joinchat":[],"footnotes":""},"categories":[84,30],"tags":[],"class_list":["post-13927","post","type-post","status-publish","format-standard","hentry","category-commercial-contracts","category-posts"],"acf":[],"featured_image_src":null,"author_info":{"display_name":"Lawants","author_link":"https:\/\/www.lawants.com\/en\/author\/lawants\/"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>EQUITY LOANS. AN ATTRACTIVE FINANCIAL HYBRID FOR START-UPS - Lawants<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lawants.com\/en\/equity-loans-an-attractive-financial-hybrid-for-start-ups\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"EQUITY LOANS. AN ATTRACTIVE FINANCIAL HYBRID FOR START-UPS - Lawants\" \/>\n<meta property=\"og:description\" content=\"When it comes to finding alternatives to fund entrepreneurial projects, tax advisors are often asked which are the instruments at [...]Read More... from EQUITY LOANS. AN ATTRACTIVE FINANCIAL HYBRID FOR START-UPS\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.lawants.com\/en\/equity-loans-an-attractive-financial-hybrid-for-start-ups\/\" \/>\n<meta property=\"og:site_name\" content=\"Lawants\" \/>\n<meta property=\"article:published_time\" content=\"2019-09-23T00:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-17T09:05:39+00:00\" \/>\n<meta name=\"author\" content=\"Lawants\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@lawants\" \/>\n<meta name=\"twitter:site\" content=\"@lawants\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Lawants\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.lawants.com\\\/en\\\/equity-loans-an-attractive-financial-hybrid-for-start-ups\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.lawants.com\\\/en\\\/equity-loans-an-attractive-financial-hybrid-for-start-ups\\\/\"},\"author\":{\"name\":\"Lawants\",\"@id\":\"https:\\\/\\\/www.lawants.com\\\/en\\\/#\\\/schema\\\/person\\\/f21309642c940f81050a36dddacaa3a7\"},\"headline\":\"EQUITY LOANS. 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