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Original poster

Been invited to invest in friends business

44 replies

feelsobadfeltsogood · 05/02/2022 15:45

Hey Mumsnetters

My friend has got his own business it's doing ok but he's asked me to invest to buy some more equipment etc....

It turned over £55k last year and he's looking for a £30k investment

What kind of return would that give me? He said it'll be worth my while as interest rates are low bank interest in nothing these days but o have no experience in this

Just to set the scene work I'm employed but have 3 houses I rent out but 2 of these have outstanding mortgages on them 1 I can remortgage

I want to help him but I'm really not sure how this arrangement would work

OP posts:
FFSFFSFFS · 05/02/2022 15:46

Christ no

crumblebug · 05/02/2022 15:47

!!!! do not do that

WitchDancer · 05/02/2022 15:47

What was the profit on the £55,000 turnover? How much would your £30,000 increase the profit margin by?

Hoppinggreen · 05/02/2022 15:48

Are you doing it to help him or as an investment?
Because the information you need will be different in either case.
His net profit is more important than his Turnover too

Based on the very limited information here it looks like a good way to lose £30k and a friend

LemonMuffins · 05/02/2022 15:48

Why would it be worth your while? What are you being offered in return for your "investment"?

I wouldn't touch it on the figures you've provided.

Snowiscold · 05/02/2022 15:49

Just no. What profit did he make on the £55k?

truthfullylying · 05/02/2022 15:49

No no no no no no no no no no no

Do not do this.

You sound absolutely clueless and therefore this is extremely high risk for you. There is a high chance you will lose all of your investment.

truthfullylying · 05/02/2022 15:50

He said it'll be worth my while as interest rates are low bank interest in nothing these days
You still have your original £30k though if you put it in a bank!

ThisIsStartingToBoreMe · 05/02/2022 15:54

Hell no!

You know the old saying " never mix business with pleasure "? Well it's true

titchy · 05/02/2022 15:56

As he points out interest rates are low. So a business loan would also have relatively low interest rates.

BringBackCoffeeCreams · 05/02/2022 15:57

Why can't he borrow the money from his bank if it's so worthwhile?

Washermother33 · 05/02/2022 15:58

No . You need to know what profit he made not his turnover . The fact that you don’t know this makes me think that you don’t know very much about business which leaves you in a vulnerable position . Definitely fo not borrow money to invest

VodselForDinner · 05/02/2022 16:02

At £55k turnover he’s probably barely paying himself, let alone being able to give you a return.

I’d be saying no to this one.

Morechocmorechoc · 05/02/2022 16:03

You'd have to own a share of the business. If it was dragons den with only 55k turnover and I imagine very little profit they would probably want 70percent of the business!! Ot sounds worthless. You would need to pay solicitor fees, get amendments on companies House for your shares, understand the cash flow etc and as a large owner your legal responsibilities.

I can guarantee you do this you won't stay friends and a good chance you lose every penny. Don't do it

RG2468 · 05/02/2022 16:04

Erm no chance what actual profit did he make? Put it this way I turned over £230k in my first year of business and prob made £200k in profit I’m not seeking any investors

IncompleteSenten · 05/02/2022 16:06

You would be very foolish to do this.

There's a reason he's asking you rather than proper investors or approaching a bank.

Worst case scenario you lose £30,000.

Are you ok with that?

SeasonFinale · 05/02/2022 16:07

£55k turnover is bugger all and turnover means nothing. He could actually be making a loss. The fact that he hasn't told you the profit and handt set out what % of the business £30k would buy you shows he is either a poor businessman or a con man.
I wouldn't want to invest in either.

If you have a spare £30k you can afford to lose and want to help him that's fine. If not run!

SouthOfFrance · 05/02/2022 16:08

There's got to be a good reason the bank won't lend it to him...

toppkatz · 05/02/2022 16:11

Is it a Ltd Company or is he a sole trader?

And turnover is meaningless really unless you also know the figure for expenses, and the net profit. What assets are there, and how much has he already invested in the business?

Lindy2 · 05/02/2022 16:12

He's asked you for £30k but without any details of his profits or the expected return? £50k turnover means nothing without knowing expenses and profit. The profit could be zero.

If he needs £30k and has a viable business with a good business plan then he can borrow from the bank himself.

Step right away from it OP. If you do this he will no longer be a friend.

JugglingJanuary · 05/02/2022 16:12

Go ahead- if you can afford to lose £30k.

If he was a good friend he wouldn't be asking you (as you're clearly not clued up on investing) or telling you it's better than in a bank... bank is almost risk free.

Banks will lend him the money if it's a good investment.

SprayedWithDettol · 05/02/2022 16:14

That would be a hard no from me.

DPotter · 05/02/2022 16:14

No No No and just in case you didn't get that NO

If your friend had turned a profit, he would have told you. The fact he's only mentioned turnover is highly suspicious - he could have a turnover of £55,000, with costs of £54,999.

Lordamighty · 05/02/2022 16:15

Can you afford to lose £30k?

soberfabulous · 05/02/2022 16:17

I invested 30k in a friend's hotel business a few years ago. He provided me with a clear business plan and projections and we also drew up a legal contract stating when I would get the investment back (it came in stages).

I got all my money back plus a good return: but we did it properly and my friend has an excellent business track record.