Definition: What is a Business Investment (BI)?
A business investment (BI) is defined as the money spent on creating, developing, running or expanding a business with the expectations of future returns.
A prerequisite for something to be considered a business investment is that you have some ownership of the business and, hence, stand to make a profit.
Image Source: Investing in a Business
Does Lending to a Friend Qualify as a BI?
Lending money to a friend who wants to start his own business is not considered an investment, unless you also get partial ownership of the company.
Image Source: Business Investments
If you give him the money with the stipulation that he’ll give it back, you’re doing him a favor, but you’re not investing in the business.
Overview of Business Investments
Business investments have the potential to bring enormous returns, but not without risks.
It is usually not just about the money, but also the work and people involved.
If the business doesn’t take off, then the money you’ve spent on it will never be returned.
That being said, a sound business investment can have huge and ongoing benefits.
Unlike speculation, where you constantly need to trade if you want to make a profit, running a successful business can be a lot less demanding.
Furthermore, as an investor in a business, you might not even have anything to do with the management process, yet still reap all the benefits.
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