| Hi Taylor
- My brother asked if I could loan him money for a food service company
he's launching. I trust him and like the concept but get a little
nervous about lending money to family. Any advice? - Marjorie
Hi Marjorie - Family or otherwise, anxiety is always the right
feeling when asked to lend money. Once you get past those initial
nerves, you need to look past the family part and assess the situation
the business? If you like the concept, this loan request has
already passed the first test. The main reason I would advise
someone not to loan money to a family member is if they feel guilted
into doing so and otherwise wouldn't put capital behind such a
venture. If you think your brother understands the industry and
knows about all the insurance, inventory, and staffing costs associated
with food service, the family connection becomes moot. Do you
think this business, as proposed by the business owner and with
location in mind, has a chance to do well with the proper funding?
If so, don't dismiss the proposal.
2. What's the plan? One million "good" concepts get pitched
at dining room tables every day. The trick is turning a bright
idea into a profitable company, and that involves a solid business
plan. If you're going to invest in this company, you should request
a detailed model for how money will get spent, returned, and reinvested.
As a personal investor, you deserve as much say as you want in
this company. If it makes sense, you might want to use your money
to buy an active role in the operation. Angel investing can make
you a lot of money while helping your brother grow the business.
However, if you choose to move forward, make sure you get what
you want out of this investment.
3. How much are you spending? Like with any investment, don't
spend a penny more than what feels comfortable. Even with a great
concept and the smartest brother on the planet, you still face
plenty of risks with this kind of venture. You don't want to put
so much money on the line that an unforeseen disaster could sink
multiple family members. Ignore the amount your brother asked
for and think about what you can confidently invest - that's what's
| If you have
a family member with a billion-dollar idea, you don't want to miss
out on it. At the same time, you don't want to lose money on a bad
idea just because of a sibling bond. Set aside the relationship and
think about investing on your own terms. While you mull it over, your
brother might want to have a look at a business funding article we've
got up at GoFarWithKovar.com.
Best of luck to both of you, Marjorie!
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.