When it comes to financing your new business venture and you are not able to fund your business on your own, you will need to consider a loan from family or friends. You may have someone close to you who is able and willing to loan you the money you need to start your business. The advantage of going to family or friends for financing is the ease of obtaining a loan without going through the lengthy loan process, and in most cases is quickly and readily available. Normally, you can also obtain a loan from family and friends with no interest or a much lower interest than you would obtain through other sources.
Although, when looking to family and friends for a business loan, you are taking a risk with relationships turning bad if things do not go the way you anticipate in your business. It is important that you talk through the risks involved and that everyone understands the business plan and the possible risks of loss while building the business or in the unfortunate event that the business does not succeed. Talk through what will be expected if this were, in deed the case. Decide if this is a loan or a partnership and come up with a proposal that will work for everyone involved.
Before approaching your family or friends, think it through completely. If there is already a strained relationship with a particular family member or friend, or there is someone who likes to take control of everything, those are probably not the people you want to go to for a business loan.
It is always imperative that you keep everything organized and legal. Be sure to write all of your agreements up in a contract and have it signed by all parties in front of a notary. Remember this is a business venture, and you need to protect yourself and your business while keeping your relationships intact.