Finance From Family and Friends – Small Business Finance
Family and Friends
Many entrepreneurs borrow money from family and friends; while some invite them to invest in the business itself.
Remember that if a loan from family or friends carries interest then the lender has to declare the interest received as taxable income, and you can deduct the interest when calculating your profit for tax purposes. If the loan has no interest then there are no tax implications for either of you.
Advantages of Family Borrowing/Investment
Family and friends will usually accept terms that are beneficial to you; e.g. less interest, longer repayment times or a smaller stake than a lender or outside investor.
Family and friends are likely to need less convincing than a bank or other lender.
Family and friends who invest may be happy to be less active partners than other investors.
Disadvantages of Family Borrowing/Investment
If things do not go well, or the lender wants a larger input into the business you risk damaging long standing relationships.
Family and friends are more likely to need quick repayment prior to the arranged terms (due to personal financial problems), whereas banks and other lenders have more stability.
Using Family and Friends for Business FinanceArticle Index
- An Introduction to Small Business Finance - Factoring, Invoice Discounting, Invoice Finance
- Banking and Overdrafts - Small Business Finance
- Credit Card Finance - Small Business Finance
- Grant Finance - Small Business Finance
- Small Firms Loan Guarantee - Small Business Finance - now called Enterprise Finance Guarantee
- Finance From Outside Investors - Small Business Finance
-
7. Finance From Family and Friends
- Related Articles
