Small Business Tax Center
Small Business Ideas, Grants &
Plans to Start & Run a Business:

Small Business Grants
Network in Cyberschmooz Community Ask Questions Questions and Answers Share Tips Small Business Ideas List Your Business Business Advice from Idea Cafe Experts Coffee Talk with Experts Starting A Business Business Plan Biz Planning | Sample Plans Small Business Ideas Idea Name Your Biz Name Plan Your Biz Plan Financing $ Starting a Business Do It! Running your Business Marketing Tips Promotional Merchandise Marketing Tips Marketing | Sales | Customers Human Resources HR | Employees | Contractors Legal Forms & Tax Information Legal | Biz Forms Managing a Business Managing | Operations
Financing Resources Financing Your Business E Commerce & Webhosting eCommerce Take Out Info Trade Publications FREE Trade Publications Business Books Biz Books Your Own Business Small Business News Small Biz News Gen X Biz Gen X Biz Work at Home Work @ Home Business Information The Fridge - Biz Info on Ice Destress Send Awards Send Awards & Greetings Yoga At Your Desk Yoga @ Your Desk Fun Guide Guide to Find FUN Online About Idea Cafe Press Idea Cafe has received Idea Cafe in the News Idea Cafe's Kudos Kudos for Idea Cafe Advertise on Idea Cafe Advertise on Idea Cafe Privacy Policy Privacy Policy Contact Idea Cafe Contact Idea Cafe Link to Idea Cafe Link to/from Idea Cafe Join Idea Cafe
Search Idea Cafe Site Directory Site Map Online directory to business resources Biz Web Guide

Idea Cafe's CyberSchmooz
Financial Feasts

Financing message forum where you can get and give insights found nowhere else. Belly up to the table and request funding. Or tell your money tales. Any money talk is fair game except ads.

The Latest Hot Topics:

Show Me the Money!
Belly up to the Financial Feasts table and talk turkey about money... what to look for, where & how? All money talk is fair game. Go


Friends and Family

1. Why Get Financing from Friends and Family?

2. Who is This Good For?

3. When is This the Best Choice for Me?

4. When is This Not Advised?

5. Tips for Getting the Money.

6. Ingredients You'll Need on Hand.

7. Idea Cafe Tips.

8. Watch Out For...

9. Web Links.

1. Why Get Financing from Friends and Family?

What's more handy and logical than starting and building your business with financial help from your family? Not much, especially in some families and cultures where this method of financing is taken for granted by everyone involved.

But while your family may be willing (or even eager) to help you build the business you dream of, this close, convenient financing can backfire and make you wish you'd looked a little farther from home for the money.

2. Who is This Good For?

You've got to have a strong stomach to ask people you care about to invest or loan you their savings for your company If something goes wrong, the problems (and possibly your perceived failings) may be dissected over family dinners for decades to come.

You need only a few hundred or thousand dollars -- so little that a bank won't want to be bothered with you.

You're new in business and haven't established credit.

3. When is This the Best Choice for Me

After you've demonstrated confidence in yourself by putting in absolutely everything you've got, says Mark Rubin, a principal with The Metropolitan Group, a Leonia, NJ consulting firm that specializes in family businesses. "You've got the most at stake, so you should have the largest vested interest," he says.

4. When is This Not Advised?

When you can qualify for other financing sources. True, you may pay more interest to an outsider, but that may seem cheap when compared to the psychological price you might pay for giving up your independent stature in the family.

When it's a big sacrifice for the family member or friend to extend their money to you. Be sensitive to their real capabilities, and only accept their money if you know they wouldn't really be affected if something happened and you couldn't pay it all back as agreed.

When there's already enough friction in the family that you don't want to be the cause or the recipient of more flare-ups.

5. Tips for Getting the Money

Your great-aunt might not ask for a balance sheet and income statement, but an uninformed investor, of any sort, is a time bomb. Provide relatives and friends with the hard facts about your business venture, emphasizing the risk involved.

Quell your loved-ones' queasiness by tackling it head-on. Explicitly talk about the ways that you'll maintain boundaries between your relationship and the financial investment: "No discussions of return on equity at the movies."

6. Ingredients You'll Need on Hand

  • A standard promissory note and an hour or two of your lawyer's time to tailor it to the terms you and your lender agree to.
  • A written note (in case someone forgets later) spelling out your agreed boundaries between biz and family issues, such as: "We agree not to discuss business at family meals."
  • A dispute-resolution agreement that spells out how you and Uncle Stu will avoid coming to blows should either of you fail to keep the terms of the loan. Would you rather take it to a lawyer, to mediation, or grandma? Decide while you're still on speaking terms.
  • Basic financial package.

7. Idea Cafe Tips

People get funny about money. Taking money from a friend or family member often puts the relationship on edge until the agreement is fulfilled as promised. And it means now your financial affairs are no longer private. Can you stomach hearing them discussed around the Thanksgiving table year after year?

If anything goes awry with the money, it can taint the personal relationship for years or forever. Even if everything goes right, others may become jealous of your success, instead of joyous.

So, look before you rush to take advantage of that familiar, comfortable source of money. It's not free and it may turn out to be much more expensive than you bargained for, so heads up!

8. Watch Out For...

Consult with your family lawyer about how the loan or investment might complicate estate planning issues.

Unintentional arm twisting. Some relatives may feel they have to invest or risk jeopardizing your relationship. You want them to feel their choice to invest or loan you money was a reasonable business decision, not a bribe to keep you from badmouthing them to Grandma.

Disclosure discomfort. You may have to reveal a great deal about your personal financial situation in order to demonstrate that you've devoted all your available resources to the business.

Your business becomes the family business. Okay by you?

9. Web Links

Family Firm Institute
A membership organization for consultants, educators, advisors and professionals serving the family business.

Venture Associates Ltd.
A Denver financial consulting firm run by James Arkebauer. Information on tapping friends and family for financing, as well as finding angels, venture capital, investment bankers, management consultants and more.



Small Business Tax CenterIdea Cafe HomeSign UpBiz Grant CenterCyberSchmoozCoffee Talk with ExpertsPeople in Biz ProfilesStarting Your BizBiz PlanningRunning Your BizFREE Trade PublicationsMarketingFinancing Your BizHuman ResourcesLegal & Biz FormsManaging Your BizeCommerceYou and Your BizGen XWork@HomeThe FridgeDe-StressSend an AwardSend an eGreetingYoga @ Your DeskWeb GuideIdea Cafe in the NewsAbout Idea CafeAdvertise on Idea CafeContact UsPrivacy PolicySite MapSmall Biz News

Copyright 1995-2024, DevStart, Inc. Downloads are for personal use only, not for resale to others, and may not be reprinted in any form without written permission from DevStart, Inc.

DISCLAIMER: We hope whatever you find on this site is helpful, but be cautioned that it may not apply to your own situation, or be totally current at any given time. DevStart Inc. and all of its current and past experts, sponsors, advertisers, agents, contractors and advisors disclaim all warranties with regard to anything found anywhere on this family of websites, quoted from, or sent from DevStart, Inc. and its related sites, publications and companies. We also take no responsibility for comments published by others on these pages.

TRADEMARKS: The following are Registered Trademarks or Servicemarks of DevStart, Inc.: Idea Cafe®, Online Coffee Break®, The Small Business Gathering Place®, Take out Info®, Biz Bar & Grill®, Complaint-O-Meter®, A Fun Approach to Serious Business™, CyberSchmooz™, and BizCafe™.