Loans from Family
Are you searching for money to start a new business? The first place entrepreneurs commonly look is their own savings or credit cards. The second place is family and friends.But borrowing from relatives, or allowing them to invest in your new business, can put your personal relationships at risk, and the cozy nature of such loans can lead business owners to be lackadaisical about repaying the money.
The default rate for such friends-and-family loans is 14%, says Asheesh Advani, owner of CircleLending, which manages private loans; he is also author of “Investors in Your Backyard” from the Nolo do-it-yourself book series.
If there’s one piece of advice to heed above all others, it is to put your financial arrangement in writing. Write a formal business plan, make out a promissory note and draw up a formal repayment schedule and stick to it. Such documentation cuts the default rate on private loans in half and makes it easier for both parties to claim their tax benefits, Advani advises.
Photo by spullara.
No comments yet.
Leave a Reply