Investment Guys - Non Bank - loaning Money For Startup Business (2 Viewers)

Question.

I'm woefully ignorant on borrowing or lending money. Mostly because I don't like owing money.

Footballguys was bootstrapped from the start and we never borrowed anything. 

For Bryant Boats, we did some small line of credit stuff with banks and construction type loans.

Had a conversation this week where someone was offered to loan a startup business money. Talking about loaning $30,000 unsecured. He knows and trusts the team of people starting the business and likes them and their concept. 

The question is what kind of return he should expect on the money he would loan.

His option is to keep the money invested in the stock market where he's making excellent returns.

Is there a standard type rule of thumb for this?

And to be more clear, the guy is thinking along this line:

For the borrower, he can seek out a loan with bank or other source. The variables there are how much security is put up. And the interest rate. And payment terms.

For the lender, he is looking at what return he might see if he put the money into something else.

If it were a straight up loan with a % interest paid, what is reasonable there?

The guy had mentioned 15% annual interest.

12-15% is probably the going rate for people who can't get a conventional bank loan. But I'd much rather have my money in the market right now, so if I'm loaning money to anyone, it's because I believe in them, not because I want to make a profit.

Unsecured start up capital?  I'm not sure any amount of interest is enough.  I want interest commensurate with risk + a piece of equity. If I believe in the concept and the operators. Restaurants and bars need not apply. Exceptions made for known operators.

Ron Swanson said:

Unsecured start up capital?  I'm not sure any amount of interest is enough.  I want interest commensurate with risk + a piece of equity. If I believe in the concept and the operators. Restaurants and bars need not apply. Exceptions made for known operators.

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It's both a restaurant and bar. LOL. 

So if the guy could get a $30,000 loan unsecured at 15% interest, you'd think that was a good deal for the borrower?

Joe Bryant said:

It's both a restaurant and bar. LOL. 

So if the guy would get a $30,000 loan unsecured at 15% interest, you'd think that was a good deal for the borrower?

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Yes. The lender is nuts in that scenario, IMO.  Odds of ever getting his money back are very, very low.