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Borrow money from friends and family (New Business Checklist)

If you can't fund the business on your own, friends and family are a great option. Unlike a bank, they know your character well and will probably be more willing to take a risk on your business idea. However, because of the risk that mixing business and friendship may sour the relationship, you'll want to proceed carefully. Here are some guidelines to follow:

  • Have your attorney draw up a formal agreement with collateral specified and all the terms spelled out, including the interest rate, payment schedule, and what recourse the lender has if the loan is not paid.

  • When you pitch your business idea to your friend or family member, approach the meeting professionally. Present your idea and your business plan just as if you were applying for a loan at a bank.

  • Avoid mixing emotions with business. If a family member offers to loan you money in exchange for having a closer relationship, accepting the offer could create a very bad situation.

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