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How should you undertake a business loan from your family or friends?

 

 Running a business is an expensive and time consuming project but getting adequate finance at the start is one of the most important parts.

How should you go about talking to friends and family when raising funds and asking for loans?

Read this great article to help you get some answers:

How to handle business loans from friends, family

This features an interview with Anson Liang, the founder of TrustLeaf, a way for small businesses and start-ups to raise money from family and friends.

Question: As a serial entrepreneur yourself, what has been your experience with raising money from family and friends?

Answer: In early 2011, I created an online business with two of my friends. Over the next year, while designing our product, we all basically ran through our personal savings and maxed out credit cards. We didnt qualify for any bank loans at the time. I avoided asking friends and family for loans because then my co-founders would also have to raise money from their friends and family, just for it to make sense. It was much easier to avoid those awkward conversations and just keep depleting my savings account.

Fast-forward a year: Our product is ready to go and ready to be promoted. Except we all had run out of money and couldnt pay our rent, much less invest in the type of promotion that our product needed in order to become popular. By then, it was too late to begin a real funding campaign, and our product basically died while we were busy searching for regular jobs.

The worst part about this was that we were all software engineers with lots of friends and colleagues at Google, Apple, Facebook, etc., who had plenty of money they could have loaned us. Two of my friends offered to loan me money, but they only wanted to loan the money to me directly, not to my co-founders, whom they didnt know. In the end, I decided it wasnt worth the stress, time, and risk of ruining the friendships.

 

 

 

 

 

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