How to Ask Your Family for a Loan to Start Your Business

If you’re starting your own business, you will need a lot of capital. Most of us do not have a lot of savings and our only option is …

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If you’re starting your own business, you will need a lot of capital. Most of us do not have a lot of savings and our only option is to turn to banks and other financial organizations for a loan. However, this can be extremely difficult, especially due to the stringent requirements.

Compare different lending firms and find one that’s the most affordable for you, we’d still suggest you to first consider asking your friends and family members for money. It can make a lot of difference.

According to Bill Baker from Lend Capital “getting a loan from a family member definitely has its advantages, such as low or no interest, flexible repayment terms and you may even be able to defer payments until profits are generated. Don’t let fear stop you from asking for a loan. The possible reward far outweighs any short-term embarrassment or rejection”.

However, for many people, it can be a bit difficult to ask their loved ones for money. How do you accumulate the courage to go to your friends and ask them to lend you money?

Well, it’s easy if you have the right tip. Check below:

  1. Consider it a Business Deal

Don’t look at it as an appeal to help you out. Treat it as a business deal and things will go well.

Sit down and make a list of people who may be interested in helping you out. It can be anyone from your parents to your best friend.

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According to CBSNews “When it comes to doing business with friends and family, blood isn’t always thicker than water. Despite the best of intentions and the highest of hopes, what starts out as a seemingly “safe,” mutually-beneficial project or interaction can turn into anything from a minor embarrassment to a major nightmare.”

  1. Make a Kickass Presentation

Create a presentation highlighting your idea. It should be as professional as possible. Don’t take things lightly just cause it’s not a bank on the other end. Get ready to answer questions regarding your business.

When someone invests in your business, they have every right to ask you question regarding how you plan on running it. After all, it’s their money that is on the line.

  1. Approach Them With a Plan

Once you have a presentation, it’s time to approach your target. Call ‘em up and let them know you wish to meet regarding a business proposal. It’s important to inform the person beforehand so that they’re prepared to listen to you.

  1. Give Something in Return

Give people a reason to lend you money. Banks do it for the interest. There should always be a motivation. You can offer to pay interest or agree to give them a share in the profit for the first year or so.

Consider all the options and pick one that’s suitable for everyone.

  1. Have Everything in Writing

Verbal agreements are great but they have no value. Always have everything in writing and get a lawyer involved, if necessary. All the terms and conditions of the loan must be agreed to beforehand so that there are no issues.

It doesn’t matter who the lender is, your brother or your neighbor, it’s important that you two discuss the matter in detail and be on the same page regarding everything.

  1. Don’t be Upset

Don’t let rejection affect you. Not everyone may be interested in investing in your business. Some may have no faith in your idea and some may have no money.

It’s important that you understand the situation and not let it affect your relationship.

Why You Should Ask Family and Friends for a Loan

It has many benefits including:

  • Ease: The ease is amazing. People who know you will be willing to offer you money without getting into the details. Plus, the terms may also be in your favor.
  • Fees: You don’t have to pay different charges when you deal with friends and family members. This can make the loan more affordable for you.
  • Collateral: In most situations, you will not need a collateral when you ask a family member for a loan.

Follow these tips and you will have no difficulty in getting a loan. In case, you’re not successful, then you can turn to other options such as online lending companies and banks.

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