| Q: My youngest son wants to borrow $5,000 to | | | | mortgage company ever named a kid after you? |
| start his own business. My wife is afraid to | | | | Probably not.The same rule applies with |
| tell him no. She thinks we should just give | | | | investing in a relative's business. I have |
| him the money and not expect anything in | | | | raised money for several business ventures |
| return. I disagree. He doesn't have a very | | | | and not once did I ever think about asking my |
| good track record with money, so I'm a little | | | | relatives to chip in. The last thing I'd ever |
| worried that my investment will be lost. | | | | want to do is lose my mother's yard sale |
| Should I loan him the money and hope for the | | | | money. I'd never hear the end of it!An |
| best or just tell him no and hope he doesn't | | | | investment is made with the understanding |
| get too upset?A: The first thing you need to | | | | that your money is totally at risk with no |
| do, Jeff, is determine if this money would be | | | | guarantee of return. Even under the best of |
| offered to your son in the form of a gift, | | | | conditions an investment in any business is a |
| loan or investment. The very wording of your | | | | gamble. You are betting your money that the |
| question tells me that you have not yet made | | | | business will be successful and that you will |
| that all-important distinction.It sounds like | | | | get a payback at some point in the future.Hug |
| your wife wants to make a gift of the money, | | | | your money real tight before making the |
| expecting nothing in return but the undying | | | | investment, because if the business doesn't |
| love of her last born son.You, on the other | | | | make it, you will never see your money |
| hand, don't know if you should offer the | | | | again.You and your wife also seem very |
| money as a loan (should I loan him the money) | | | | worried about making your son mad, which |
| or as an investment (worried that my | | | | raises another huge red flag for me. If your |
| investment will be lost).Until you can make | | | | son isn't mature enough to take the word "no" |
| that distinction, your money should remain in | | | | without getting upset, he's certainly not |
| the bank.I have a very simple rule when it | | | | mature enough to start and run a business. |
| comes to loaning money to relatives: NEVER, | | | | Unless that business is a bicycle paper |
| EVER loan money to anyone you might have to | | | | route, and even then I wouldn't put my money |
| sit next to at Thanksgiving dinner."Son, pass | | | | on his chances of success.The bottom line is |
| me that dressing and tell everybody the story | | | | this: if you can afford to give your son the |
| of how you blew your old dad's retirement | | | | money and can do so without attaching strings |
| money..."A loan from a relative is no | | | | to it, then by all means give him the money |
| different than a loan from a bank. You, Mr. | | | | and wish him well. Encourage his |
| Banker, are giving your son, Mr. Borrower, | | | | entrepreneurial spirit and support him as a |
| the use of your money for a specific period | | | | parent should.Do not, however, expect |
| of time and you fully expect the loan to be | | | | anything in return and never bring up the |
| paid back under specific terms, even if his | | | | money again, especially if he's the one |
| business goes south. Sure, you will probably | | | | carving the turkey on Thanksgiving Day.Here's |
| be a little more forgiving than a bank when | | | | to your success!Tim KnoxSmall Business Q&A is |
| the loan goes unpaid, but the damage to your | | | | written by veteran entrepreneur and |
| personal relationship could be extreme and | | | | syndicated columnist, Tim Knox. Tim serves as |
| hard to repair.In the most basic of terms if | | | | the president and CEO of three successful |
| you loan your son the money you become the | | | | technology companies and is the founder of |
| creditor and he becomes the debtor. Have you | | | | DropshipWholesale.net, an online organization |
| ever heard of a creditor and debtor having a | | | | dedicated to the success of online and eBay |
| very good relationship? Has Visa ever called | | | | entrepreneurs. |
| you up just to ask how you're doing? Has your | | | | |