Friends and Family
Although borrowing from family and friends is always a possibility, think it through carefully. Can the family member making the offer really afford to lend it to you? If the business fails, can they afford to lose the money? And what would happen to your relationship in that case? Businesses come and go, but family ties are forever.
This source of start-up funding can be a major financial and emotional minefield. If you do decide to go this route, at least take it seriously. Draw up formal paperwork showing the amount lent, the interest rate, the timing and amount of payments, and what happens if you default on the loan. And, above all, honor the commitment you've made to protect not only your own integrity, but also your relationships with those closest to you.
Consider, too, whether the loan comes with strings attached. Will you be expected to visit every weekend to show your gratitude? Or report regularly on the health and status of the business? Will your judgment be questioned, and will the source of the loan want decision-making power over certain spending or other business choices?
