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A Clothes Encounter In The Business World
Do you ever wonder where all the dress rules have gone? Depending on when and where you are on any given business day, the words "distant past" might come to mind. It's difficult to decide if people don't know what to wear to work or if they have...
Falling Home Values and Preforeclosure Investing
The rapid increase in home values has proven to be as good as
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Investing in stocks and shares
Stocks and shares, unit trusts and investment trusts Shares
give you part ownership of a company, so the value of your
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Online Investing and Trading discussions at www.streetplayer.com
The new investment forum, www.streetplayer.com is back. streetplayer.com is an investment information site for those interested in using Internet to obtain information about stocks and other securities. Our plan is to build comprehensive database of...
Turning Bad Debts into Good Debts through Investing Fundamentals
If you've ever earned enough money to put some aside, like most people you've probably invested it with an eye toward security – since, perhaps, you can't imagine yourself ever getting rich. "Most people dream of becoming rich, but it isn't their...
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Small Business Q & A: Investing In Son's Business Could Cause A Real Family Feud
Q: My youngest son wants to borrow $5,000 to start his own business. My wife is afraid to tell him no. She thinks we should just give him the money and not expect anything in return. I disagree. He doesn't have a very good track record with money, so I'm a little worried that my investment will be lost. Should I loan him the money and hope for the best or just tell him no and hope he doesn't get too upset?
A: The first thing you need to do, Jeff, is determine if this money would be offered to your son in the form of a gift, loan or investment. The very wording of your question tells me that you have not yet made that all-important distinction.
It sounds like your wife wants to make a gift of the money, expecting nothing in return but the undying love of her last born son.
You, on the other hand, don't know if you should offer the money as a loan (should I loan him the money) or as an investment (worried that my investment will be lost).
Until you can make that distinction, your money should remain in the bank.
I have a very simple rule when it comes to loaning money to relatives: NEVER, EVER loan money to anyone you might have to sit next to at Thanksgiving dinner.
"Son, pass me that dressing and tell everybody the story of how you blew your old dad's retirement money..."
A loan from a relative is no different than a loan from a bank. You, Mr. Banker, are giving your son, Mr. Borrower, the use of your money for a specific period of time and you fully expect the loan to be paid back under specific terms, even if his business goes south. Sure, you will probably be a little more forgiving than a bank when the loan goes unpaid, but the damage to your personal relationship could be extreme and hard to repair.
In the most basic of terms if you loan your son the money you become the creditor and he becomes the debtor. Have you ever heard of a creditor and debtor having a very good relationship? Has Visa ever called you up just to ask how you're doing? Has your mortgage company ever named a kid after you? Probably
not.
The same rule applies with investing in a relative's business. I have raised money for several business ventures and not once did I ever think about asking my relatives to chip in. The last thing I'd ever want to do is lose my mother's yard sale money. I'd never hear the end of it!
An investment is made with the understanding that your money is totally at risk with no guarantee of return. Even under the best of conditions an investment in any business is a gamble. You are betting your money that the business will be successful and that you will get a payback at some point in the future.
Hug your money real tight before making the investment, because if the business doesn't make it, you will never see your money again.
You and your wife also seem very worried about making your son mad, which raises another huge red flag for me. If your son isn't mature enough to take the word "no" without getting upset, he's certainly not mature enough to start and run a business. Unless that business is a bicycle paper route, and even then I wouldn't put my money on his chances of success.
The bottom line is this: if you can afford to give your son the money and can do so without attaching strings to it, then by all means give him the money and wish him well. Encourage his entrepreneurial spirit and support him as a parent should.
Do not, however, expect anything in return and never bring up the money again, especially if he's the one carving the turkey on Thanksgiving Day.
Here's to your success!
Tim Knox tim@dropshipwholesale.net For information on starting your own online or eBay business, visit http://www.dropshipwholesale.net
About the Author
Tim Knox as the president and CEO of two successful technology companies: B2Secure Inc., a Web-based hiring management software company; and Digital Graphiti Inc., a software development company. Tim is also the founder of dropshipwholesale.net, an ebusiness dedicated to the success of online entrepreneurs. http://www.dropshipwholesale.net http://www.smallbusinessqa.com
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