Jul 17, 2018
In this part 2 of the 4 part series “Money. Where to Find It” we’re talking about borrowing from family and friends.
You can always turn to people who you know best. It can be easier to persuade them rather than the big banks. Borrowing money from a personal friend or family member is a very popular option. Even though they’re a family member or friend, you still need everything in writing so everyone is on the same page.
A 2015 survey found that 68% of small businesses used financing from family and friends, but borrowing from family or a friend can be tricky as well. Needless to say, borrowing from family and friends comes with its own set of risks.
Make sure you have the terms of the loan clearly written down. This includes:
- how much to be borrowed
- the amount of interest to be charged
- the time-table for when the repayment will occur.
You can also give them the option to convert their loan into equity in your company.
So remember, the 2nd way you get get money to finance your business, is to receive a loan from family and friends - both with the option of converting the loan into equity in your company.
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