MONEY MORAL DILEMMA. Should Margaret let Nick remortgage to back her new business?

Aldahbra

from what you have just said, it sounds like that if you had had independent investment your buisness wouldn't have gone under. Doesn't that mean that raising your own money in this way would have been a good idea?

hundredk

Margaret is a 25-year-old entrepreneur who desperately wants to set up her own nightclub business. Yet she can’t find the £60,000 backing needed to set up the company. Her Dad, Nick, offers to remortgage so he can invest in the firm. While Margaret’s confident the nightclub will take off, Nick’s home will be in peril if it fails. Should she let him remortgage?
No way.

"Desperately wanting to" and having a sound business plan are two different things. £60k to set up a new nightclub business does not sound enough to me. Wages, advertising, stock, refit, overheads for a 2-3 nights/week trade.:eek: If it's a sound business plan go to the bank - if they wont lend forget it.

Otherwise Nick could drown his sorrows with whats left of the stock after a month:beer:

edchalk

This is a ridiculous scenario - any night club costing £25k to set up will be a complete dive. Mags should be able to accumulate her own start-up capital by contracting her own nights at established clubs, and this should allow her to build on her industry experience at the same time.

JayD

Short answer -
NO WAY!!!

We need to be able to bail our kids out financially when they are drowning.

We can't do that if we invest the means to bail them out in their business ideas.

If no one else will invest then it can't be a rock solid proposition.

hundredk

edchalk wrote: »

This is a ridiculous scenario - any night club costing £25k to set up will be a complete dive.

:doh:....£60k

relaxtwotribes

As is the case with most MMDs, there is insufficient data available to be able to come to an informed opinion. All the posters are making assumptions about Nick's financial circumstances, when the only information we have on his situation is that he has sufficient equity in his home and the borrowing power to be able to raise the £60k he wants to make the investment. Actually, we have one further bit of information and that is that Nick's lender is willing to lend him an extra £60k without Nick having the income now to be able to service a larger mortgage and knowing that the nightclub needs to be successful to enable Nick to repay the mortgage. Err, in today's financial climate, please can anyone let us know where such lenders are? (rh.)
So, where is the moral dilemma? It is a straight forward commercial investment decision for Nick and no-one has the right to advise him like a schoolchild not to invest.
Good luck to you, Nick - go for it if that is what you want to do.

hundredk

relaxtwotribes wrote: »

As is the case with most MMDs, there is insufficient data available to be able to come to an informed opinion. All the posters are making assumptions about Nick's financial circumstances, when the only information we have on his situation is that he has sufficient equity in his home and the borrowing power to be able to raise the £60k he wants to make the investment.

Read the OP - Nick offered to lend the £60k - it is your assupmtion that wanted to.

relaxtwotribes wrote: »

Actually, we have one further bit of information and that is that Nick's lender is willing to lend him an extra £60k without Nick having the income now to be able to service a larger mortgage and knowing that the nightclub needs to be successful to enable Nick to repay the mortgage. Err, in today's financial climate, please can anyone let us know where such lenders are? (rh.)

All we know is that Nick can remortgage to get the £60k but in doing so needs the income from the investment to service the higher payments. Nicks lender is willing to lend the £60k because it is secured against the property, hence the dilemma if the investment fails.

relaxtwotribes wrote: »

So, where is the moral dilemma? It is a straight forward commercial investment decision for Nick and no-one has the right to advise him like a schoolchild not to invest.
Good luck to you, Nick - go for it if that is what you want to do.

Think Nick may be hypthothetical:rotfl:

relaxtwotribes

hundredk wrote: »

Read the OP - Nick offered to lend the £60k - it is your assupmtion that wanted to.

All we know is that Nick can remortgage to get the £60k but in doing so needs the income from the investment to service the higher payments. Nicks lender is willing to lend the £60k because it is secured against the property, hence the dilemma if the investment fails.

Think Nick may be hypthothetical:rotfl:

I did read the OP but it seems that you did not. Nick has not offered to lend £60k - he has offered to borrow £60k. Nick is re-mortgaging so he can invest.

Now reread my post without inserting a full stop after "£60k". The word "wants" doesn't mean "desires"; it means "needs".

As for the suggestion the lender is willing to lend an extra £60k because it is secured on his property, without due regard for a payment profile covering interest and capital, then that is risible. That's what pawnbrokers do, not banks, building societies etc.

Nick hypothetical!! That's a real disappointment:D

SilverFox

Caz45 wrote: »

Yes, if he believes in his daughter, (he should know her best), and he could do the same for any other children.

This age group (25ish) can have wonderful ideas, great commitment to succeed and bags of time and energy. They are too often put down.

My parents did very little for me and built up stacks of money which is now being spent on bills for Mum’s care home, £440 a week, as she has Alzheimers.

Nick might well know his daughter, but what does he know about nightclubs?
The '25ish' age groups might have all the attributes you list, and more, but as a parent I suspect that common sense is usually not one of them.

lastly, Caz45, do you really begrudge your 'stacks-of-money' dad [AKA sensible] paying some [and could eventually of all of it] to look after your Mum in the terrible world of Alzheimers . . . . . . .

hundredk

relaxtwotribes wrote: »

I did read the OP but it seems that you did not. Nick has not offered to lend £60k - he has offered to borrow £60k. Nick is re-mortgaging so he can invest.

Now reread my post without inserting a full stop after "£60k". The word "wants" doesn't mean "desires"; it means "needs".

As for the suggestion the lender is willing to lend an extra £60k because it is secured on his property, without due regard for a payment profile covering interest and capital, then that is risible. That's what pawnbrokers do, not banks, building societies etc.

Nick hypothetical!! That's a real disappointment:D

Still don't think a full stop turns desire into need.

Along with other factors, lenders determine the amount they lend by formula, ie 3x income. Just because the bank may be willing to lend that amount doesn't necessarily mean the borrower can realistically afford to pay it back. Risible? Have you noticed that banks have stopped lending at 125% and 5x income, or considered why that is? Irresponsible lending springs to mind, knowing that when the borrower defaults enough they take it out of the house and indemnity insurance.