Business Loan

Q: My youngest boy desires to borrow $5,000 to begin his ain business. My married woman is afraid to state him no. She believes we should just give him the money and not anticipate anything in return. I disagree. He doesn't have got a very good path record with money, so I'm a small disquieted that my investing will be lost. Should Iodine loan him the money and hope for the best or just state 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 boy in the word form of a gift, loan or investment. The very diction of your inquiry states me that you have got got got not yet made that all-important distinction.

It sounds like your married woman desires to do a gift of the money, expecting nil in tax return but the deathless love of her last born son.

You, on the other hand, don't cognize if you should offer the money as a loan (should I loan him the money) or as an investing (worried that my investing will be lost).

Until you can make that distinction, your money should stay in the bank.

I have a very simple regulation when it come ups to loaning money to relatives: NEVER, EVER loan money to anyone you might have to sit down adjacent to at Thanksgiving Day dinner.

"Son, base on balls me that dressing and state everybody the narrative 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 usage of your money for a specific clip period of time and you fully anticipate the loan to be paid back under specific terms, even if his business travels south. Sure, you will probably be a small more than forgiving than a bank when the loan travels unpaid, but the damage to your personal human relationship could be utmost and hard to repair.

In the most basic of terms if you loan your boy the money you go the creditor and he goes the debtor. Rich Person you ever heard of a creditor and debtor having a very good relationship? Have Visa ever called you up just to inquire how you're doing? Have your mortgage company ever named a child after you? Probably not.

The same regulation uses with investment in a relative's business. I have got raised money for respective business ventures and not once did I ever believe about asking my relations to bit in. The last thing I'd ever desire to make is lose my mother's pace sale money. I'd never hear the end of it!

An investing is made with the apprehension that your money is totally at hazard with no warrant of return. Even under the best of statuses an investing 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 existent tight before making the investment, because if the business doesn't do it, you will never see your money again.

You and your married woman also look very worried about making your boy mad, which raises another huge redness flag for me. If your boy isn't maturate adequate to take the word "no" without getting upset, he's certainly not maturate adequate to begin and tally a business. Unless that business is a bike paper route, and even then I wouldn't set my money on his opportunities of success.

The underside line is this: if you can afford to give your boy the money and can make so without attaching twines to it, then by all agency give him the money and wishing him well. Encourage his entrepreneurial spirit and support him as a parent should.

Do not, however, anticipate anything in tax return and never convey up the money again, especially if he's the 1 carving the Meleagris gallopavo on Thanksgiving Day Day.

Here's to your success!

Tim Knox