A friend of mine sent me links on convertible debt note:
- http://techcrunch.com/2012/04/07/convertible-note-seed-financings/
- http://techcrunch.com/2012/04/21/convertible-note-seed-financings-econ-101/
- http://techcrunch.com/2012/05/13/convertible-note-seed-financings-part-3/
It's basically giving your contractor options to either take the equity at discount price or take the cash value of their service when you receive funding.
A lot to read... a lot to learn...