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Investing in sons big business could cause a real children feud - investing


Q: My youngest son wants to have a loan of $5,000 to start his own business. My wife is frightened to tell him no. She thinks we must just give him the money and not count on something in return. I disagree. He doesn't have a very good track album with money, so I'm a a small amount anxious that my investment will be lost. Ought to 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 affect if this money would be existing to your son in the form of a gift, loan or investment. The very language of your difficulty 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, pregnant nonentity in come again but the abiding love of her last born son.

You, on the other hand, don't know if you be supposed to 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 be supposed to hang about in the bank.

I have a very austere rule when it comes to loaning money to relatives: NEVER, EVER loan money to a person you might have to sit next to at Prayer dinner.

"Son, pass me that dressing and tell every person the story of how you blew your old dad's retirement money. . . "

A loan from a family member is no assorted than a loan from a bank. You, Mr. Banker, are benevolent your son, Mr. Borrower, the use of your money for a aspect dot of time and you fully assume the loan to be paid back under detail terms, even if his big business goes south. Sure, you will doubtless be a barely more forgiving than a bank when the loan goes unpaid, but the break to your not public bond could be acute and hard to repair.

In the most basic of terms if you loan your son the money you be converted into the creditor and he becomes the debtor. Have you ever heard of a creditor and cheat having a very good relationship? Has Visa ever called you up just to ask how you're doing? Has your finance band ever named a kid after you? Doubtless not.

The same rule applies with investing in a relative's business. I have raised money for numerous affair 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 accord that your money is entirely at risk with no assure of return. Even under the best of circumstances an investment in any commerce is a gamble. You are gambling your money that the commerce will be booming and that you will get a payback at some point in the future.

Hug your money real tight beforehand creation the investment, for the reason that if the affair doesn't make it, you will never see your money again.

You and your wife also seem very concerned about assembly your son mad, which raises an added huge red flag for me. If your son isn't mature adequate to take the word "no" not including receiving upset, he's definitely not mature an adequate amount to start and run a business. Except that commerce is a bicycle paper route, and even then I wouldn't put my money on his odds of success.

The bed line is this: if you can give to give your son the money and can do so exclusive of attaching strings to it, then by all means give him the money and wish him well. Egg on his consumer apparition and assistance him as a mother should.

Do not, however, be expecting everything in benefit and never bring up the money again, chiefly if he's the one monument the bomb on Thanks Day.

Here's to your success!

Tim Knox

Small Big business Q&A is in black and white by old hand capitalist and syndicated columnist, Tim Knox. Tim serves as the leader and CEO of three booming equipment companies and is the come to grief of DropshipWholesale. net, an online company dyed-in-the-wool to the accomplishment of online and eBay entrepreneurs.

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