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Invitation to Invest
How do you respond to an invitation from a friend to take a stake in his business?

Out of the blue you receive an e-mail from an old friend to acquire an interest in his business. So have some other friends. You are interested, but are also apprehensive and suspicious about the invitation. Why now?

There could be different reasons why you have been approached. This you will have to give thought to. In doing so you must consider whether your sole objective is to get the benefits from the business or help a friend who is possibly facing temporary difficulties.

One scenario could be that the business is going smoothly and he made the offer with a general desire to benefit his friends whilst at the same time getting some or all of his initial capital back. If this is the case, then you need to consider the share you are getting against the amount you are investing.

Or, it could be that the friend needs capital to expand his business. But, if this is the case, you should ask why he cannot borrow the money from a bank where he has only to pay back the loan with interest rather than give up part of his interest in the business, which is what he would have to do if he offers shares to his friends.
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Source : The Star
Date of  Publication : Tuesday, 31 January 2012
Original Title : Invitation to invest
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