Ok, but he takes more risk to never get his money then those who get paid. So it is a risky investment in the company and the interests or possible bonus should take this in account.
In other words, if someone takes an IOU instead of cash then they are assuming risk. This risk has value, and in the real world this is what your interest rate reflects. The Lender adjusts the rate relative to the risk.
So by all means agree on the interest rate. We have an interest rate here set for both "lending to" the company and "taking from" the company. ie there are times when a founder needs some extra cash, and it makes sense to borrow it from the company rather than a loan-shark. We have that rate in place too.
The key here is not to use _equity_ to cover _operational_ expenses, at least at the founder level. Loan accounts should be used to cover operational expenses.
Equity has implications beyond pure "cash" because it contains a "power" component as well. The ability for one founder to "out vote" the other leads to poor conflict resolution on both sides - the one knows he has the ultimate decision, and the other knows it too.
More than that, the "cash value" of equity is a thumb-suck and will not be reflected in the final outcome (either way). Thus it's a complete gamble which will inevitably leave one side feeling screwed when the outcome happens (whatever the outcome is.)
In other words, if someone takes an IOU instead of cash then they are assuming risk. This risk has value, and in the real world this is what your interest rate reflects. The Lender adjusts the rate relative to the risk.
So by all means agree on the interest rate. We have an interest rate here set for both "lending to" the company and "taking from" the company. ie there are times when a founder needs some extra cash, and it makes sense to borrow it from the company rather than a loan-shark. We have that rate in place too.
The key here is not to use _equity_ to cover _operational_ expenses, at least at the founder level. Loan accounts should be used to cover operational expenses.
Equity has implications beyond pure "cash" because it contains a "power" component as well. The ability for one founder to "out vote" the other leads to poor conflict resolution on both sides - the one knows he has the ultimate decision, and the other knows it too.
More than that, the "cash value" of equity is a thumb-suck and will not be reflected in the final outcome (either way). Thus it's a complete gamble which will inevitably leave one side feeling screwed when the outcome happens (whatever the outcome is.)