It’s quite common for entrepreneurs to find capital for
their businesses from family and friends. In fact, according to the Global Entrepreneurship
Monitor 2012 Unites States Report, most startups are funded by those close to
the entrepreneurs.
But, embarking on such financial arrangements could lead to
the erosion of good relationships here are some of the challenges you need to
contemplate before borrowing money from loved ones.
1.
Money
Might change both of you.
Money will inevitably cause strain in the
relationship. No matter how reasonable you or your lender is, financial issues
like deficits or even profit will change both of you and cause disagreement at
various intervals.
2.
You’ll
be enslaved by the lender.
Until you’re able to pay off your loan, you’ll
have this shadow of insecurity cast over you.
At the beginning, most lenders will be cool
about it, but when you start spending, say on a new car or a fancy wardrobe,
and he/she notices, things start to get ugly. Instantly the lender/your friend
or family will start thinking, “How is she squandering the money on expensive
stuff, when she still owes me money?”
3.
It’s possible
your business go bust.
What if your entire plan turns out to be
one big failure? How will you be able to pay that person back? That’s sure to cause
a huge gap in your relationship.
So here are ways to avoid loans from destroying
your relationship with loved ones.
·
Keep the arrangement
strictly formal; let it resemble that of a bank loan. There should be obligations
of repayment – by the way, failing to pay back what is borrowed is never okay,
under any circumstance. You should have terms of payment- perhaps a little
flexible than that of a bank though.
·
Create a
schedule for payment. Your business might not generate enough revenue. In
that case, make monthly payments to the lender and add penalties to late
payments.
·
Add
interest payments. Normally loans come with interests, so why should your
arrangement be any different?
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