"Give me money, I’ll give you a share of the profit"

My professional insights · Lyudmil Karaulanov · 5 min read

Published: 1 August 2026 · Version 1.0

“Give me money, I’ll give you a share of the profit.” There may be genuine trust in this proposal. One person has an idea and the skills, the other has funds available and believes in them. Both want to get started without turning the conversation into negotiations between strangers.

This is precisely where I think it is worth slowing down. It helps for each person to explain how they envisage the venture ending. When will they get their money back? What do they expect if things go well? And if they do not? The answers may reveal that we have not yet agreed on the same thing, despite using the same words.

What does “I’m giving you the money” mean?

With a conventional loan, the expectation is that the sum will be repaid as agreed, regardless of the business's success. The lender bears the risk of the borrower failing to perform. With an equity investment, the investor participates in the business outcome and may lose the money invested.

There are other arrangements between these two: a loan with a return linked to performance, a contractual profit share, or an option to acquire an ownership stake under specified conditions. The form therefore cannot be chosen merely by the name the parties have given their relationship. The first question is what loss each accepts and in return for which rights.

It is worth including time in this conversation too. For the entrepreneur, the financing may be temporary help. For the person providing the funds, it may mean a stake in the business's future. The disappointment is particularly painful when both were convinced that they had reached an honest understanding.

A percentage of which profit?

Suppose the financed project is doing well, while another activity within the company is making a loss. Will the provider of funds receive a payment? The answer depends on whether the agreement concerns the project's result or that of the company as a whole.

Further details follow, and they are far from minor: are we calculating before or after tax and interest, how do we account for depreciation and overheads, and do we include management remuneration? Accounting profit is not necessarily cash that is already available for distribution either.

A numerical example usually helps more than a lengthy explanation. Seeing how the arrangement works in cases of success, delayed payment and loss makes it clearer what has actually been promised.

The right to check the calculation

If your income depends on a result calculated by someone else, the question is how you will verify it. Who allocates costs between projects? What reports will you receive? How will a disagreement over the calculation be resolved?

I would not leave this conversation until distrust has already arisen. Access to information agreed in advance protects the entrepreneur too: they will not have to prove their good faith each time through exceptional explanations.

What needs to be recorded?

The agreement and the documents recording the transfer of funds need to be readable together. A bank statement shows the movement of money, but does not in itself explain whether it is a loan, an investment or an advance. The legal consequences depend on the specific arrangement and the applicable formal requirements.

Before the transfer, it is worth clarifying whether the principal is repayable, which activity is being financed, how the return is determined and how it will be verified. If a future sale or acquisition of a stake is being discussed, it is important to distinguish a possibility from a binding commitment.

Where is the point of instability?

What this concept means →

It can remain hidden in the most familiar words: “help”, “participation”, “percentage”. A later dispute does not always arise from bad intentions. Sometimes each person simply remembers their own understanding of the initial conversation.

The trust with which such a venture begins is worth preserving. It is best protected when it is expressed clearly before the funds are provided. The agreement will then describe genuinely shared intentions, rather than conceal two different expectations.

This material is of a general analytical nature and does not constitute individual legal, tax, financial or investment advice.