❝ Don’t personally guarantee your startup

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Quoted: Don’t personally guarantee your startup

Based on their literature, Paintbrush provides a $50,000 loan with a very low-friction application and a fast decision. But the total repayment amount can be as much as $75,000, tied to a personal founder guarantee. That means that if your startup doesn’t work, you as a founder are required to pay that amount back at an amount pegged at 15% of your pre-tax income. For example, if your total income was $150,000, you would pay back $22,500 a year. That amounts to around 22% of what your post-tax takehome pay would be before payments like health insurance and rent.

So basically this is all of the downsides of traditional VC with none of the upsides. Yeesh.

In traditional VC, it’s the investors who are taking the risk of funding the company. This scheme is doing none of that and is instead what amounts to a payday loan.