Should I Choose a Debt Investment or Preferred Equity Investment?

Investors should choose their investments based on their individual risk tolerance and investment objectives. On NextSeed, the type of equity companies offer is preferred equity. The type of debt companies offer is either revenue sharing notes or term notes (both are secured notes).

In general, debt investments on NextSeed means businesses are offering monthly payments to investors and to make payments in full by a certain maturity date. Usually, these are short/middle-term investments of up to 6 years. Investors have no ownership in the business and the investment ends when payments end. If a business liquidates its assets, debt holders are first in line and have a claim to those assets before equity stake holders. This means debt holders will be paid first before equity holders get anything.

Preferred equity investments on NextSeed means investors are part owners of the business but do not have management or voting rights. Generally, a business will make quarterly dividend payments to preferred equity stakeholders. These are usually long-term investments and there is a potential upside of the preferred equity shares increasing in value. If a business liquidates its assets, preferred equity holders have a claim to those assets before common stockholders, but are behind debt holders.