What Is the Advantage of the Revolving Loan Concept?

    Many venture capital financing deals are initially started with loans because they are backed by assets of the borrower and make it possible to look at a company's performance before making a larger commitment.   This process lowers investment risk and adds an incentive for the borrower to perform better.

    The idea of a revolving loan fund is that loans are made for a short term, 90 to 180 days at fairly high rates. The loans are used to improve the business so that equity funds can be brought in, which will then be used to pay off the loans. Properly managed, this type of strategy can be very useful and profitable to develop ventures.

    FairShares4U has designed a note purchase program for qualified companies as part of an initial "bridge financing" process.  This program can be used by self-directed investors and clubs, in effect, as a revolving loan budget whereby the same funds are used to invest in different ventures.