If you are a small business owner, you probably know how difficult it is to get finance for business, particularly for a first time small business entrepreneur. No need to hold off your dreams just because you are unable to get funds from bank or other sources. If you are unable to get a business loan, yet you are sure your business idea is going to work, you can turn to your friends and family for getting some funds. Taking money from friends or family is always considered a risky business and you have to be very tactful as well as truthful so that you don’t jeopardize your relation with them.

But you need to take the risk and go ahead with your plan if you want your dreams to come true.  Here are some tips to help you get some cash for your startup:

1.      Seek the right time:

You need to be patient and wait for the right time to ask for money. You cannot exploit a happy family moment to ask for money. Never ask for money when someone had a bad day or a fight, chances are you won’t be helped.

2.      Show your faith and passion:

When you ask for money and tell them about your business plans, show optimism and faith in yourself. If you say stuff like that ‘I will try but’ you will end up having no money at all. So just stay upbeat, be very confident and share with them a colorful positive picture of your vision. Remember that no one will believe in you if you won’t believe in yourself.

3.      Be Respectful and keep the right attitude:

tips of getting funds from familyIf you are asking for their input in your dream and the project, they will obviously get involved and give you suggestions. So listen their suggestions, keep them updated about your project details and show respect if they stay around you. No one wants to see their money going down the drain so if you are actually taking their money, you are giving them a right to get involved.

4.      Present a complete plan:

Nothing gets the confidence of a person than a neatly written down well sorted plan. If you want to go an extra mile to get the confidence of your family and friends, take the pain of planning out in a well-written format. You will surely impress them with your planning and dedication.

5.      Sign an agreement:

Most people overlook this important point while dealing with friends or family, but let me tell you, it will save you in tough times. If they agree to give you some amount of cash, write down the agreement clearly, set down rules and mention the risks. Get it signed in the front of at least one informal witness.

6.     Choose someone who can afford to lend:

When approaching a friend for money, make sure they can afford to lend or lose the money. Do not get the money from someone in dire need of cash themselves. Also ask for the minimum amount not the maximum.

Always keep the above points in mind before approaching a friend or family member for a loan for business. We all know how relationships can be ruined if one is not careful and not invested enough in the new business idea. Don’t ever make that mistake!

 

  • Mohit Arora

    Very wisely said.