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Why you have decided to raise funds from your loved ones?

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It’s considered as one of the quickest and easiest ways to raise business funds. Obviously, most of the banks or financial institutions won’t ever put their money on risk, especially if you are a beginner. But your friends and family won’t hesitate to give money as they are close to you.

Pros
This is considered as one of the quickest ways as you won’t have to fill any application form to get the money. Someone rightly said, “A friend in need is a friend indeed”. If they won’t help you, who will? Moreover, you can also convince them to invest the money as professional investors do so that they can reap the benefits in the long run. Plus, they won’t charge any additional interest and support you in business ups and downs.

Cons
You are actually putting your relationship into stake. Be it your friendship or any other relationship with the person you share who decided to help, relationships are at stake. Your next holiday trip won’t be good if you fail to make any profit in your business. Moreover, they may also get annoyed if you have not returned the money and planned a holiday trip.

This is one of the major reasons why most of the people deny asking for help from their friends or family for their start-up business. Be careful about your relationships, you should explain the business plan to them and also mention the deadline within which you will return the money.

How To Proceed With The Fund-Raising Plan?
It can either be considered as gift or probably a loan. Some of the people also consider it as investment so that they can reap the benefits if your business succeeds. Each of the points has their pros and cons, and you should get all the details in writing to avoid any kind of financial dispute in future.

Gifts
One of the best things about gift is that you won’t have to return it back. Unfortunately, it can sometimes turn into loans when your friends and family realize that you have succeeded. Therefore, it’s important to get the document signed by both the parties so that you don’t get into any kind of trouble in future.

Loans
According to most of the experts, loans are considered as one of the most optimal ways to invest because there are some particular repayment terms. Your friends and family want to know how long it will take to get the money back and whether you will provide any additional interest.

Of course, it depend on your friends whether they would ask for any additional interest. Mostly, your loved ones won’t ask for any additional interest for the given money. So you should consider both the advantages and disadvantages before asking for loan from your friends and family.

Equity
You won’t have to pay the money back unless and until your business succeeds. However, your friend or relative will be a business partner and so you have to share the business profits with them. They have the right to tell you how to run the business.
Keep all these excellent tips in mind when you have decided to raise funds from your friends and family.

Good luck!

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