Thursday, March 21, 2013

Should you ask a family member for financial funding?

Are you looking into getting some financial funding from a family member but are not sure if it is a good idea? Well, it can be challenging working with family members and even more challenging when a large amount of money is involved. You need to consider how involved the family member will be in your business and how strong a relationship you have.

Before doing anything else, create a contract, just as if you were dealing with a bank; put it in writing and spell out the terms of the loan, interest, payments, time frame, etc. Also, have a plan B in mind just in case the business fails, and make sure the family member is aware of it as well. Here are some pro and some cons for you to consider.

• More than likely they will not ask for a credit score nor perform a background check
• They may not ask for interest on the loan• If you need a favor, they may be willing to help out, unlike banks
• Possible payment flexibility
• He or she will care about the long-term success of your business...because remember, you are family!

• Relationship can be ruined
• Unwanted advice
• Family member may be demanding, even more than a bank

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