I'm thinking of investing in a friend's business good idea or bad idea?

Hes been in business for three years and has seen at least 25% growth and looking to expand he needs $20,000 to buy more equipment and is willing to give 10% of gross sales at 60k sales last year the rest of my figuring is as follows
10% of 60k is 6k (min expected return)
15% of 20 is 3k (good return on stock market)
also he wants a buyback clause after 2 yrs.

This is isn't just a friendly loan as business is business so assuming everything checks out and contracts are build. This seems like a good deal to me am i just crazy?? is there anything i'm missing? Also hes not the type to just run off with the money or closes shop..

Anytime I've done something like this, I've gotten burned due to factors not considered in the analysis (such as the financial condition of the borrower). These kind of loans are so risky they are off the chart. Make sure he doesn't have any bad habits (woman, drinking and gambling) or past bankruptcies or any kind of history of "burning" his lenders. Get a credit report on his. He should have a good credit score. Also don't lend the money unless you are totally prepared to lose it all. If you still feel okay after doing all that then go for it. You might be surprised!

if you can afford it and trust the guy then go for it. hope it works for you.

It sounds like you are in a position to take a chance, GO FOR IT!

if its so good then why does he need to barow from you then say a bank?

depend on how much u trust yr own decisions n him

Say what type of business it is. The past performance does not necessarily indicate future performance. 8-track tapes sold great for a while.....i wouldn't invest in a place that sold them nowadays though.

My opinion is "friends don't work for friends" for obvious reasons. If you trust him though, then do what you need to do and help him succeed. His success will lead to yours as well as his failures also.