I have a client who is in the process of investing into a local business. A remortgage is being taken for £250,000 and in return, there will be 20% share issue. The business intends on repaying the full amount with a further 125% within 3 years. If this payment is not made, then interest will be charged on a monthly basis. There are 3 directors who will all be legally bound to mitigating 25% of the loss (each) in case the venture does not succeed and the investor will only suffer a 25% loss. All risk mitigation is being done via solicitors and guarantors are also being legally committed.
Am i right in thinking that EIS cannot apply?