QUESTION: I need to borrow some money to start my own business. I would like to buy a bus, start a sports bar, or even improve on my house so I can rent out the other side of it. Therefore, I am planning to borrow $2 million, but I owe the National Housing Trust $1.7 million. The value of my house is $6 million. I do not have any savings because I just used all of it to pay my father's hospital and medication bills. He is much better now.

My salary before tax is $153,014 and net pay $103,000 per month. I live rent free but I rent my house for $16,000 per month and use those funds to do a little construction on the house. I have a wife and a daughter. My wife's pay is just enough to take care of our daughter and herself for the month.

The monthly bills in the house, including food, are about $25,000. My credit union can lend me $2 million for 10 years with a pay-back of $36,100 monthly. Should I borrow the money and just wish myself good luck based on what is happening worldwide?

- Douglas

Borrowing to start a business is one way to generate income to increase your wealth. Your decision should be based primarily on whether the business is able to generate enough income and cash flow to service the debt.

Other expenses

There are several gaps in the information you have sent me which, if closed, would put me in a better position to advise you. Your net monthly salary is $103,000 from which you spend $25,000 to run your household. You have not said what your other expenses are, not even your mortgage.

You also mention that you have no savings primarily because of your father's recent illness. How much are you able to save considering that he is well now?

Would you not have savings at the credit union from which you are planning to borrow?

How much is your wife earning, and what does it cost to take care of her needs and your daughter's needs? I suggest you make a budget in which you would account for all of the family income - hers and yours - including the rental income of $16,000. Make a full accounting of all of the expenses of your family as well.

A budget is important because it will help you to manage your financial resources better, see where your money is going, and put you in a better position to realise your goals. It will help you to spend on what is really important.

To get a good idea of your wealth, identify all of your assets, including what is owed to you, and take account of their value and subtract what you owe from it. The rental income you are using to work on your house is adding to your wealth as it increases its value.

Business ideas

You are contemplating three business ideas. Of these, the rental of your house would provide the most stable and predictable income stream. The downside is that it is the least likely to give you significant increases in income.

Consider also that the bus itself will certainly depreciate in value over time. That is less likely to happen to the others.

It is for you to determine which can yield enough income to at least make your principal and interest payments each month over the full term of the loan. If you can pay off the debt in less than 10 years, all the better.

Which of these businesses is likely to demand more of your time and attention? Which will cost you more to operate, and will you have the cash flow to meet the attendant expenses? Is there sustainable demand for what you propose to offer? Will you be able to meet your loan-servicing demands if the cash flow from your business is interrupted?

You cannot escape uncertainty in business, but business can fare well even in times of financial crisis and uncertainty. It is not to be entered into blindly. Do some serious homework, with help, if necessary, and then make your decision.

Oran Hall offers free counsel on money management. Email: finviser.jm@gmail.com.