When you raise money for a deal, there are only three legitimate paths:
1. Borrow the money
2. Partner with someone who brings capital
3. Raise money through an SEC-approved securities structure
That’s it. Each lane has its own rules, pros, and cons.
Where people get into serious trouble is when they try to blend lanes. The most common mistake I see is something called a participating note—where someone says, “I’ll pay you interest on your money, and when we sell, I’ll also give you a piece of the upside.”
That’s borrowing and partnering at the same time.
You can’t drive in two lanes. When you try, you’re not being creative—you’re creating legal and regulatory problems. That structure can trigger securities violations, lender disputes, and massive risk if the deal goes sideways.
Choose one lane. Do it clean. Paper it correctly.
That’s how real deals get done and stay out of trouble.
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