Ms. MiniDucky called me out in her post about loaning her parents some money for a new business venture. This took some time and soul searching for me. I don’t usually respond to direct solicitations for advice. I’m not an expert on financial matters. I’m not professionally trained, but I think she’s asking me because this is about family relationships and the link between love and money. This scenario takes filial piety to a whole different level. I keep editing out stuff about me and my parents, telling all, and then scrubbing it. It’s so damned PERSONAL.
Basic outline, if you don’t want to click through (but you should to get more info), is that she’s considering loaning her father some money for a new business venture supplying other service companies vs direct to consumers. Complicating it are some past intrafamily loans she’s made and her feelings about those loans, as well as her feelings about her own financial stability as well as that of her family. I wrote a good chunk of this post directed at ‘you’ but I actually mean ‘her’, Ms. MiniDucky.
Dad’s friend encouraged him to try this … his wife owns two of those businesses and would be willing to take the supplies off his hands.
Rule #1, get that promise in writing if your dad goes through with it. Once his friend has to put his money where his mouth is, he may back out and then it doesn’t look so good. In fact, I would say that your dad should ask his friend for the seed capital rather than you. After all if this friend is so confident the venture will succeed, then he should be confident he will see the money again from your parents. (My parents have borrowed serious cash from friends and paid them back. Let’s just say it was more than a lot of people could borrow on credit cards. How nice of their friends to do this, but the risk to their friends was low if they could just wait for the cash to starting flowing in from the business.)
Should you do it? Me personally? At first blush, I’d say no. Despite what I write about, I don’t track too closely the stuff my parents do as entrepreneurs. Some of it took place when I was very young and unaware. Some of it I heard about once and never heard about again. Until I was asked to actively help manage one of their businesses, I told my parents what I thought when invited, and then stayed out of it. They were going to do what they liked with or without me and it is quite literally, their business, not mine. I’ve been totally freaked out that my parents didn’t have a handle on their retirement, but sticking my neck out that far is a lot to ask.
I feel like I can supplement Social Security with the help of my sibling, but to fork over a wad of cash for a new business, is a non-starter in my head. My folks should be taking care of their sh*t and if they can’t, they need to fix why they can’t. Sounds tough, but my parents raised me this way, which is why I’d have no problem telling them tough cookies, don’t do it. (Heh. Now that I think about it, I HAVE had that conversation telling them it’s a bad frickin’ idea, don’t do it. More than once! But they don’t listen to me after they ask me what I think.) My parents have messed up more than once. They’ve done ok more than once too. Before my dad’s stroke, I looked upon them as pretty capable and competent people and I know that my mom still is. She’s doing alright even though my dad isn’t what he used to be. My mom can be very strong minded and we are on the same page about the financial stability of our entire family.
I guess these are the other questions you should ask yourself:
Did your parents ask you for the money? Or are you thinking of volunteering the money?
Do you want to protect your investment?
Do *you* think it’s risky?
Have you and your folks done the due diligence and talked to other owners besides their friend and his wife? (I’d get some more information about this opportunity. Check with the BBB, etc. It sounds like your dad is going to take some more time to consider this chance, and I think there’s nothing wrong with that idea. If it’s that hot, it’ll stay hot enough for him to do his research.)
Do you want a say in how the money is used and when it’s paid back?
Do you think your parents are going to fritter away the money on this business? If they did that, how would you feel? What would you think?
Are you ok with never seeing the money again? Are you counting on it in some fashion?
What if he needed double the estimated amount? Thrice? Do you have a limit to your help?
This is a really tough decision. When I frame it in terms of mortgaging my house so that my parents could save their business, I would have to say that I have my limits, which is probably equal the gift they gave me to buy my house in the first place. I have to have a limit, or I’d slowly be eroded like a stone tumbled in water. But my parents are in a business that everyone needs so I think it’s low risk that I’d lose it all or never see it again. It would definitely return to me in financial stability for my parents through a thriving business. For a new venture, I wouldn’t do it. I got in on the ground level of one of my dad’s hare-brained ideas (Pop was born in the Year of the Rabbit!) and I told him not to do it and why. But it was too late, the die was cast and I just rolled along with him and sure enough, it failed for the reason I forecast as a serious risk to investment in the business plan. I hated being right.
I am older than Ms. MiniDucky by close to a decade (I am guessing) and from what I’ve read, I feel very differently about my financial position than she does about hers. For the first time in my 3+ decades on earth, I feel comfortable where I am and I don’t feel like financial ruin is just around the corner for me, but I definitely read that in her posts.
In my early 20’s, I never would have done it. I couldn’t have done it with all my student loan debt. In my late 20’s, maybe I could have done it, but I’d be crying about it a lot. In my early 30’s, I would consider it carefully and put a limit to my help. Beyond that, I don’t know. It would depend on the tide of fortune.
I hope that helps. It probably complicated things, touched a nerve here and there. But this is never easy is it?
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{ 3 comments… read them below or add one }
I think that you need to really believe that it will work – not just hope that it will work, or want it work. You need to think about how you would feel if all the money was lost (and how this would impact on your relationship with your parents) but also how you would feel if you declined, someone else stepped in and did really well out of it.
Would it be different if it was an investment rather than a loan?
Thanks for the exceedingly thoughtful response, Mapgirl. I actually called you out specifically to slap some sense into me, but it wasn’t really *that* sort of situation, either. It helps. Obviously we have different situations, but this really helped to clarify thoughts and anxieties that were still lurking, unidentified.
Plonkee: If I looked at it as an investment, I think I’d have very different expectations for the results. Honestly, I’d be over the moon if someone else stepped in and did really well because that should mean that my parents were also doing really well. At the end of the day, that’s all I want for them.
I appreciate the tough love
Ms. MiniDucky – I’m glad it was useful to you. I definitely agonized about what I wrote because there is a lot of emotion wrapped up in our family relationships. You can’t be the rescuer of your family, nor martyr yourself financially for them. I think English Major might have been right to point out enabling behavior, but it’s ok, we’ve all done it to varying degrees and it’s tough because they’re your parents and you can’t just kick them to the curb. (Well, there’s a few horrible parents I know, but those are extreme cases, bordering on criminality.)
Just realize you are faced with a new choice and you can choose differently, or in a more healthy way, with your folks. They may push your boundaries, but it’s up to you to push back if that is what will make you sleep better at night.
I wish you and your family lots of luck! I hope if they go for it that it works out.