Sometimes, your resources prove to be insufficient when it comes to providing the capital you require to start up your own business.
This applies in particular if you are a fresh graduate or a budding entrepreneur. Self-finance is perhaps the most famous source with which people gain money for a startup; however, the second popular source is to borrow money from friends and family close to you.
Why friends and family?
People that you are close to you and know you will know that you are competent as well as reliable so apparently, borrowing from them should not be a problem. One thing you should note however is that asking for money is way different than asking for stuff like cars. Of course, taking money from friends and family is an easy alternative than going to bankers. However, the truth is that dealing with relative and close friends is more delicate. For example, if your startup fails, then giving back the money from the ones you borrowed from can cause a major problem thus putting the relationship in hot water!
The good news is that with just a bit of thinking, you can work out all details and consequently make the stable relationship beneficial for all of the involved parties. In fact, if you somehow handle the situation in a thoughtful manner, you can gain more than financial benefits from the business. Who knows, you might get to strengthen your personal relationships as well!
How do you borrow?
This is the real question; how do you do it and who should you ask? Of course, asking money from friends and relatives is a risky job and requires confidence because you don’t want others to pity you. Here is how you can ask them for money.
Find the right person
Obviously, this is the most vital step if you have decided to borrow from family and friends. You have to look for the best person among all the potential people. Remember, as you start looking for people that can invest in your business or can lend you money, make sure that you remove all those people from the list that always have an ulterior motive. For example, you would not want to ask money from someone who asks something in return like your attention.
Have the right approach
Once you have found the right person who you think would not be hesitant to lend you money, the next step is actually to approach them. Initially, you should contact them in any informal situation in which you get a chance. The purpose of this informal situation is to inform the person about the business you are planning and to get an idea of the amount of interest he or she is showing. How do you identify the amount of interest? Well, if the person is interested, then he or she would ask for more information regarding the business. At this point, you can get an appointment with the individual so that you can hold a meeting in a much more professional manner.
Don’t mix up business life with personal life
Whenever you talk about borrowing money, make sure that you keep your personal life away from the work life. Of course, this is tough however doing this is vital if you want to maintain a healthy relationship with the friend or relative. You should give proper details about your venture and not emotionally blackmail the person to lend money. Moreover, you should be ready to accept their rejection as well. Let them know that their decision should be purely a business decision, not an emotional one.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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