Fit Small Business: Get Your Business Into Shape! › Forums › Small Business Finance Forum › Evan, great article. Thank you. I have a question on a unique deal… › Reply To: Evan, great article. Thank you. I have a question on a unique deal…
Nice to hear from you! I’m actually originally from Sonoma County and am familiar with the wine industry. My dad, John Tarver, has worked in the industry for many years for brands like Benziger, Toasted Head, Matchbook, and more.
Anyways, this is definitely a unique deal. Could I ask some questions regarding the unamortized expense? Specifically, are they requesting a sum equal to the amount invested? If it’s not amortized, is there no interest expense at all, or is it all interest? Is it a monthly payment? Annual?
My gut tells me that you should be able to write in a clause that removes these unamortized expenses after a specific time period. For example, if it’s a 50-year contract, perhaps the unamortized expenses are removed after year 10 or year 15. You could even structure it so the amount of the expense declines over time, protecting you the longer you keep the contract in place.
Ultimately, you shouldn’t be liable for paying any more than their initial investment, and to be honest, if they expect to earn significant income from this placement, then I would expect them to take on this contract risk as part of their overall investment. I would, of course, speak with a legal contract professional about this matter, he or she should be able to tell you industry standard, if any.