Should I borrow to invest in a business of this type?

Home | Links | Contact Us | Bookmark

Financial Forum Search :

Financial Forum

Investing

Finance Discussion Forum

Advertising & Marketing Corporations Credit Insurance Investing Personal Finance Renting & Real Estate Small Business Taxes Business & Finance

I need help understanding a margin account.?

My question about a margin account is this: Do you have to pay it ALL back right away or do you make montly payments? Say I borrow 10000 from my broker, buy 1000 shares of a stock when do I have to ...

Do the super rich have sleepless nights??now that the UBS bank is failing??

...

Barclays bank.?

do you think their share price will recover within 6 months or 12 months from 260p a share today up to about where it used to float around 500p a share.
or do you think barclays share price ...

What will the price of silver and gold be 30 years from now?

whats do you think the price of silver and gold will be 30 years from now per 1once?

im thinking of buying bullions of both so i can sell them in like 30 year....

What is going to happen with my Circuit City stock now that they've filed Ch.11?

...

Day Trading Question:?

If I start the day with $30,000 can I make a $10,000 day trade as long as I close the position by the end of the day? Or does this violate the rule requiring $25,000 equity at all times?

D...

If a billionaire invests to buy 7% of Bear Stearns today, why didn't the share price rise by 7%? What's up wi

th that? If the company is worth 7% more and he bought the shares on the open market, why didn't share price go up in proportion to the new value assessment?
Additional Details
If ...

How much money would I need(minimum) to think about investing in the stock market?

What stocks would be best to invest in?...

How do you determine what is a good price of a stock? How do you indicate whether the p/e matches price per?

How do you determine what is a good price of a stock? How do you indicate whether the p/e matches price per share?...

Please help me?

Is it proper to purchase stocks in a shoe company that uses child labor in developing nations to manufacture its product? why or why not?...

What is the best investment to make these days?

...

What is the best small stock with the most potental to increase and double?

...

Is the decline in the stock market due to investors using money for other means?

...

Is gold worth the investment these days?

I have been looking at some cool gold coins, and I have always wanted to collect them like Scrooge Mc Duck and go diving into them some day...is it worth it to start collecting these days or will the ...

I need a good money making scheme. Any suggestions?

Is there a way to make money with stocks whether they are going down or up? I don't have the time to constantly monitor the market, and i have talked to people who have had bad experience ...

Is it worth making a very small investment with these fees?

My bank offers an investment account with no maintenance fees, but I have to pay 10$ for purchasing a stock, and $10 for seliing it.. It seems a bit much, but even though they allow you to keep an ...

Why do some stocks go up with no news? Are there investment programs constantly buying these stocks?

...

Help! What should I invest my money into that will produce the greatest return?

I'm 20 years old and currently in college. I want to start investing now for retirement. Currently I have 3,000 that I want to invest. After that, I would like to invest a few thousand every ...

Why must stock holders pay taxes on dividends?

Correct Answer = 10 points!

Please & Thnks!...

What is the best way to invest $15,000 over the next year with medium risk?

...

Fizz400

Should I borrow to invest in a business of this type?

I know this will be hard to answer properly without all of the details but here are a few:
My brother-in-law and his father own a successful medium size wood products manufacturing business and they are considering expanding their plant to manufacture a new "green" heating fuel product. My question is: at face value, does investing in this new division of the business seem like a possible opportunity for me or should I not take the risk? Any money invested by me would be borrowed from a bank. I truly believe the product is a good one but I have little business or investing knowledge. Also, if I do invest and the company starts to make money, how are the profits divided if I own say 10% of the company? Is it as simple as when all operating costs are covered I get 10% of what's left?
Additional Details
This expansion to their business is in the very preliminary planning stages they don't even know if it's potentially profitable themselves yet. They haven't asked me to invest a cent, it's just something that I saw as a possible opportunity. Like I said, I don't claim to have any investing knowledge so this is why I'm asking.

Duck!

There's an old saying, A minority stake in a privately held company is worthless. The majority shareholders don't have to give you anything. They can out vote you and do whatever they want with the company.

If you borrow money to invest, then you will have to start making payments right away, but income, if there is any, from the investment may be years away.

I'm not saying it's a bad idea, but I have a policy that I don't borrow money for anything that I don't control completely, and a minority stake in a venture gives you little if any control over what happens to the money that you're responsible for.

I've run several successful small businesses, but I made my real money in real estate, so if I were you I'd keep my powder dry and my credit good and wait a few years for some good buys in income producing property.

Good luck

Longhaired Libertarian

To find a bank willing to give you the money and the cost to borrow would be some major issues. Generally, IMO, it is bad business to borrow for investment, you invest what you have saved. So, start saving in order to be able to invest.

As far as how much money will get from the corporation, it depends on the corporation and how the board of directors elects to spend or distribute any profits. If all the profits are needed for capital expansion, you get an increase in the value of your equity, but no cash.

Dom

For myself personally, I would only invest in a venture if I had extra CASH on hand and I can afford to lose it. Borrowing money for a business is VERY risky because if the business risk doesn't work, you still have to pay back that full amount plus interest. The interest rate will be high as well.

If you don't get the loan, your loss is $0. If you get the loan, you might have a tough time getting a mortgage for a house, getting a car, or getting credit cards or other loans. For this to be profitable, you would have to gain more than the loan + interest.

I don't see too much upside and a lot of downside on something like this. I would stay away unless they found a huge oil patch and hasn't told anyone yet.

sithlord78

Wow... if you know this little, then you should not be investing in it. Sorry to say, but investment requires a lot of homework. And if you knew this was a good investment you wouldn't be asking us. So my answer is you probably shouldn't be borrowing money for this. Invest if you want, but invest what you can afford to lose. Bankruptcy is no fun.

Business profit sharing is all contractual. 10% contribution for 10% profit is fair. Although some people may get more because they may put in more work. Like I said, it's all in the contract.

I would be skeptical, but if you can afford it go ahead. I wouldn't be loaning the money for this though. They can loan money from the bank themselves. Why would they need you to do it?

Doc

Bank. In-law. Little business or investing knowledge.

Proceed with caution.
Bring some pessimissim to this potential opportunity.
You have ambition. Invest your time in to the details and the operation with your hands before your money.

Furn-man

Are they giving you the opportunity to invest because you are family or will the banks not give them the money they need for the expansion and they are looking for private investors. To me it would make more sense to start a separate company that sells the green heating fuel and keep it separate from the wood products. Too many grey areas when you intermingle the two companies ie what expense is from wood products and what is from green. You will eventually have a problem that will become a family problem. How the profits are dispersed is up to all the parties involved. The best advice I can give you is don't go in business with family - the only partner you need is your wife.

Obama Sucks Already

I agree with most of the naysayers. Plus, I'd like to add that this is your wife's family not yours. Heaven forbid if you should ever have any ill will toward your wife's family. Unheard of! Plus, 10% is nothing. If you are putting up the initial costs, you should ask for a majority partnership.

Enter Your Message or Comment

User Name:
User Email:
Post a comment: