| Most start-ups have to either borrow money or give | | | | Another drawback that can happen if you borrow |
| up part ownership especially when they do not have all | | | | money from family and friends is that they may |
| of the money that is needed. Most people | | | | become a little too interested in the business. When |
| automatically think of getting a loan from the bank. | | | | people have loaned you money they often consider |
| However, one option that some entrepreneurs do not | | | | that they now have a personal stake in the business. |
| think of, or even consider, is asking to borrow start-up | | | | This can be a major problem. You family and friends |
| capital from family and friends. This is a viable idea but | | | | may press you for personal and financial information |
| you should look carefully at both the positive and | | | | that you are reluctant to share. They may also come |
| negative points before you make a final decision. One | | | | up with ideas about how you should run your business |
| good thing about borrowing from family and friends is | | | | that are not in sync with the overall success of the |
| that you may end up with a very low interest rate. | | | | enterprise. This makes the situation more awkward. |
| Many people will end up with interest free loans or | | | | You now have to deal with your business and with the |
| offers when they ask their close family members. You | | | | interference of others, no matter how well intentioned |
| should remember that this is a business proposition and | | | | it is. It is a good idea to have a business plan and |
| you should treat it as such. This means that you should | | | | proposal to present to anyone that you are |
| have a written contract concerning repayment terms | | | | considering as an investment source. You would then |
| and amounts and it should include at least a nominal | | | | be able to present the facts to show everyone what |
| amount as interest. | | | | they are investing in and what the dangers and risks |
| Your family and friends already know that you are | | | | are. By presenting this business plan to your family and |
| trustworthy so there is no need to worry about | | | | friends just as if you were at a bank it conveys the |
| qualifying for a business loan. This method of finding | | | | seriousness of the venture and the professionalism. |
| start-up capital can be very quick and will enable you | | | | There are websites like prosper.com, lending and that |
| to move ahead with your plans in a very expedient | | | | will provide the information needed for business plans |
| manner. There are also some drawbacks encountered | | | | and agreements. |
| when considering to borrow money from family and | | | | Family and friends also need to know about the risks |
| friends. Perhaps nothing can strain family relationships | | | | involved with the new business before they make any |
| and destroy friendships more than money issues. One | | | | decision. If a family member or friend says no, it is not |
| of the biggest concerns is what will happen if the | | | | a good idea to keep asking them about the startup |
| business fails. You need to have a plan that addresses | | | | capital. If they are hesitant when you first approach |
| how you are going to pay back the money that you | | | | them, you should find someone else to ask for help. |
| borrowed. | | | | Should the business struggle or fail, these are the |
| If you are due to pay money back, you need to be | | | | people who would be the most upset because they |
| able to make good on your promises. It may take | | | | would be quick to respond that you pressured them |
| longer than you expected, and even though they are | | | | into the situation. Overall, borrowing money from family |
| family and friends, they may become unhappy if the | | | | and friends can be a good way to start a new |
| payments are late. This can cause hard feelings. As | | | | business. |
| the saying goes "never do business with friends." | | | | Borrow money wisely! |