Personal Finance

[renrew]

Hi,

I am currently still a student, studying B.Com Supply Chain Management, and I ran a company for a year and then sold, due to a few reasons, but mainly that I did not get along with my partner and the type of business decisions he made. I am going to reinvest the capital i made from this sale into a new business, which I believe is much better than the first business.

The only issue I have is, that with the money I earned from the previous company and the money that will come from this business(client is basically waiting for me) is that I dont know what to do with it. I would like to know from you guys what you would reccomend, now I still stay with my parents, and dont have any debt.

I will be reinvesting the money I make with the new business up untill a certain point where I would like to take a salary.

This was my basic plan:

I will have 70% interest in the business, and will be reinvesting all profits and expanding the product range untill I can sell 20% of my shares for an amount of R1mil(I know how this sounds, but my last company sold for R300 000), I would then take this R1mil and buy a company called oneserv which i believe is now maister or something (won franchise award of the year 2011) which is basically a micro lending business, where they garuntee you a 19% return on your capital(compound interest effect).

Now i will have 50% interest left and pump all extra cash from my salary into the oneserv business. What do you think?

Plus if I do take a salary and would like to buy a new car, what do you recommend financially, or what % of nett income should I be sensibly spending on a car?

Thanks for any input.

[Dave A]

Just having a plan means you're way ahead of most folk

[renrew]

Hi Dave,

Thanks for the reply, but how does the plan sound and what about vehicle financing, this is all new to me, as with the last business I did not really take a salary, the capital went back into the business.

[Nickolai Naydenov]

Microlending is considered very high risk, also what worries me is that they somehow guerantee you 19% returns, so think logically how many people there are out there that have millions at their disposal and yet they I don't see them jump on this idea. All I'm saying is be careful.

[Blurock]

@ renew, I like the way you think. Money in the bank is dead. Rather make it work for you like you intend to.

Question;
How much do you know about micro lending? and the National Credit Act?
Will you do it yourself or will you depend on others to manage the business for you?
Will the restrictions of a franchise not put a damper on your entrepreneurial spirit?

With regards to the car. This may be the worst investment you will ever make as it is the one asset that will lose its value faster than anything you are likely to buy.
Consider buying a demo or good 2nd hand vehicle with low mileage. You may get up to 20 - 30% off the new list price. Interest rates are low, so an instalment sale will be OK, as you will be earning more on your business investment.

Good luck with your venture.

[renrew]

Hi,

I do understand that a car is not an investment nor an asset (well in accounting terms it is but not investmetn wise). I would like to get a second hand car, probably a bakkie that is light on petrol, as that cost at the moment i dont like.

The national credit act and so forth, I know what the majority of the regulations are and so forth, but the franchise you buy into provide a nifty system, where a number of firms basically obtain clients for you, check credit validity of clients, paper work and so on, the reason why you get 19% is that they take the rest on micro loans if i remember correctly max interest is 30-40%.

I have asked for their contracts and even asked if the garuntee is in the contract, which it is. I also asked my uncle (advocate) to go through it and he said that he cant see anything odd, and my fathers Broker also checked the facts and said that what they offer is possible.

The way they explained it to me and other owners of this franchise is that, the system sends through requests to you to release funds for approved clients, and you basically do this on a daily basis, but what I like about it is, you dont sit with the paperwork and dealing with client issues, you still ahve work to do and accounting etc, but 19% is pretty good returns.

They did win franchise of the year award 2011 from FASA so if something was wrong they would not of won. They have over 300 people that bought into this, the issue is that you have to invest a minimum of R1 million, and thats what i believe keeps many from buying it.

Are there any other ways you guys suggest I go about reinvesting my moeny, besides investing in my company from the start till returns start to slow down?

[Blurock]

Seems like you've done your homework. The first and most important step in starting a business. Go for it!

[flaker]

its a business

PERSONAL OPINION : At the end of the day,its a business. they can GUARANTEE a return of 19% as long as they are able to get good returns. wait till they make bad loans, be it after one year or 2 years, then just see what happens. personally,i would never invest in such a business. this is extremely high risk.

[Dave A]

I would hope the franchisor side of things would help quite a lot. But I agree with the sentiments that ordinarily micro-lending can be a risky business.

I am struggling a bit to see the deal as a typical franchise, though. It seems more like a Lloyds "names" setup the way all the admin is setup centrally. Are you really a franchisee or a financier of the mother ship?

But if FASA is happy, perhaps we should be too.

[Chrisjan B]

Investigate oneserv very carefully and diligently
See this: http://www.moneyweb.co.za/mw/view/mw...=0&bsubmit.y=0