I was ask to invest 25,000 with a lady who is opening a beauty salon.?

I am very interested in doing it, but I don't know if I should lend her the money and arrange a payment plan with interest or become her partner.I was ask to invest 25,000 with a lady who is opening a beauty salon.?
This is a very difficult answer to give a proper answer to. You have 3 options:


1. give a loan


2. become a partner


3. do nothing.





From the tone of your question, it sounds like you are leaning towards either option 1 or 2. However, it would be a mistake to disreguard 3.





Does this person have any experience in running a beauty salon? Has a location been selected? Has a business plan been presented to you? Is there in equity to secure the loan?





Lets discuss 1 and 2. Loans at this time are extemely difficult to come by, especially loans for small businesses. A company that specializes in such things would probably require about a 10% to 12% annual interest rate with an equity kicker of about 10% or more.





Partnerships can somewhat of a problem even under the best of circumstances. The question always lurks as to whether the controlling partner is cheating the other partners. It happens a great deal.I was ask to invest 25,000 with a lady who is opening a beauty salon.?
invest in a good mutual fund unless you are a beautician and want to work there and keep an eye on your investment
There are many concerns. The most important question is will this lady be straight. You can have a lawyer draft up promissory notes and security agreements for a loan or a limited partnership agreement for sharing in the profits, but if she turns out to be a snake, then you will mostly likely end up losing money.





Has she had success running a beauty salon in the past? Does she make money for her partners? Does she have a good reputation? Is she putting any of her own money at risk? Have you seen her business plan and are her numbers realistic? Does she have a marketing plan? Do you know anything about the beauty salon business? Why can't she qualify for a small business loan from the bank? Are there other partners and if so, who are they?





These are just a small portion of the relevant questions that should be asked. If you are satisfied with all of the answers, then the decision between a loan or an investment depends on the projected net income.





If it looks like the business will just get by in re-paying the loan and paying the interest, then go for the loan. But if it looks like net income will be substantial, then the risk of an investment may be justified.





The business needs a a good location with good traffic. The salon should have visible frontage and signage. Ample parking is important, or mass transit should be close. Does the salon have that ';it'; factor that will draw women to the salon? And make sure the stylists are skilled and experienced.
unless you are in the business yourself, or are very well to do, (or this is a family deal AND your family won't let her not pay you back), I suggest not doing this.





most new small businesses fail.





that's because most new small businesses are started by people without enough experience, who have a team assembled that isn't up to all of the tasks, and who then lose money until they run out of money.





if you decide to forge ahead anyway





what you want to be is a limited partner. do NOT become a general partner under any circumstances -- when a business fails, ALL of the general partners are liable for ALL of the debts up to the limit of everything they ALL own.





as a limited partner, what you want to get is regular payments. The other thing you want is to profit from her business should it be very successful. this looks like some minimum pre-arranged buy out price -- perhaps some multiple of the business' net income before your payments and before she takes more than any other operator gets. [the net operating profit]





you also need clauses and agreements that she will NOT pay her personal bills out of the business, nor add relatives, friends, lovers, spouses to the payroll, will NOT borrow from the business, nor have it buy her a car, etc.








in short, you need an attorney to draw up the LP agreement and preferably one who has experience with trying to prevent the cash and business from disappearing.
If your asking total strangers about how to invest your money... then No!
You provided the answer for us when you wrote ';I don't know if I should';...then don't.





We are talking 25 thousand! You better be a lot more sure than ';maybe';.
I know a good horse in a race.