Interesting investment opprotunity...would you guys do this??

ALSportsJunkie · May 13, 2011

A friend of a friend is opening another restaurant close by - he has currently been in the business for 18 years and owns another successful restaurant/catering company. Basically, he is expanding his business to grab a piece of the market that is north of him. He had a partner that was going to go in 50% on the capital needed to get the restaurant up and running, but the deal feel through and now the guy is looking for a group of smaller financiers to get the thing up and going.

The owner will be holding a meeting in the next few weeks to discuss his goals for the restaurant, serve food, explain what will be going on, etc. Basically what I know is this - the minimum investment is $5,000. You will be paid back over a 3 year period with 8% interest of the total amount invested added each time.

I.E. you loan the guy 5,000 you get back three payments of roughly 1,666 plus 400 interest for a total of 6,200 after it is all said and done. Obviously if the business tanks you will only get a portion of your money back. I have never dealt with anything like this, but from what I know he seems like a stand-up guy. I am going to attend the presentation and see what he has to say.

boatboatboat · May 13, 2011

Why won't a bank loan him money?

If you are curious how risky this is, ask your self that simple question.

ALSportsJunkie · May 13, 2011

The only thing I can think of is that he can get out cheaper this way than going to the bank. Then again, the first thing I thought of was why wouldn't he be able to finance it all himself. I don't think he would skip town and head to Vegas, but who knows. I do know restaurants are really tough...at least half of them fail eventually.

bigbet1234 · May 13, 2011

Not in this economy.

And the food biz is RISKY

bigbet1234 · May 13, 2011

How much does he need?

bigbet1234 · May 13, 2011

If you dont have a Justbet account, you can do a $2500 deposit for a $2500 Freeplay. Hedge it out for approx 70% cash, roll it over/scalp at 1% and walk with a profit of approx $1050. That's about a 45% return on your money, with much less risk

niltes · May 13, 2011

8% return with no equity participation in a risky
business is a very poor investment.

boatboatboat · May 13, 2011

bigbet1234 said:
If you dont have a Justbet account, you can do a $2500 deposit for a $2500 Freeplay. Hedge it out for approx 70% cash, roll it over/scalp at 1% and walk with a profit of approx $1050. That's about a 45% return on your money, with much less risk

you and eye have to talk

Kettch · May 13, 2011

How well do you know him? Do you trust him? Has he ever done something like this before? How bad would it hurt you not to see a dime of that money again?

Those are just the initial questions you should be asking. After those, there are a bunch more that I would ask as well if I liked the answers to those.

boatboatboat · May 13, 2011

if his other places were doing very well, the bank would loan him the $ if he wanted them to.

he is looking for a way to have little to no risk in his new venture. he is transfering the risk to the "investors".

cincy_ · May 13, 2011

Yeah it's called "Other People's Money" ... starring Danny Devito ... and used by our federal government.

I would not want to loan this guy money at 8%.

I would want to INVEST it in his place if he has a 50% stake in it, and no salary for as long as your money is tied up.

If it goes down, his investors get their cash first upon liquidation.

If he goes for that, you know he will take care of it. If he wants less risk for himself, then it raises a red flag.

CHOPTALK · May 13, 2011

Im sure a bank is giving him a loan.
I bet this guy is just trying to get the 20% downpayment through his friends

boatboatboat said:
Why won't a bank loan him money?

If you are curious how risky this is, ask your self that simple question.

jwblue · May 13, 2011

8% for a loan to start a restaurant?

Stock market would be a lot better investment at that rate.

I would ask for 15%

G.MONEY · May 13, 2011

I have been thru this business and in these times I would suggest staying away from food service period....Look around your area and see how many places have closed over the past few years. There are much better investments than this with a much greater return.

CHOPTALK · May 13, 2011

I forgot to answer your question.

Its an awful deal.

I got offered a deal like this from a friend a few months ago for a carwash.

I was offered a stake in the company for life for my donation.
It was a good offer on paper, but I declined due to the fact that in this economy $50 carwashes is not something that I wanted to get involved with.

ALSportsJunkie · May 13, 2011

Thanks for the replies fellas - I was leaning that way and it just seems there are too many questions for me and not enough of the right answers.

sean1 · May 14, 2011

That is one stupid investment.

A speculative investment like this should pay at least 30%/year (Double your money + some in 3 years) unless you are getting ownership.

Only an idiot would agree to those terms - 8% ha.

par88 · May 15, 2011

If its really a good business, he should have no trouble getting a bank loan guaranteed by the SBA.

CujoLatte · May 15, 2011

If you can get him to give you a % of the business it may be worth it. My family owns 3 restaurants. It is a lot of work, but if this guy has 1 or 2 that are successful then odds are he will make it with this one. Get a percent of the buisness or tell him to go to the bank for money.

CHOPTALK · May 15, 2011

par88 said:
If its really a good business, he should have no trouble getting a bank loan guaranteed by the SBA.

Im sure the bank is willing to give him 80%
What this guy is trying to do is get his friends to come up with the 20% downpayment.

Interesting investment opprotunity...would you guys do this??

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