How To Make Your Family And Friends Your Investors – Minimizing The Risks Of Personal Loans
Most people dont realize that over half the businesses in America are financed by money from family and friends. The truth is everyone relies on their circles when they have nowhere else to go. Someone with mediocre credit may have a difficult time getting a start-up loan from a bank, but Mom and Dad will always help out if they can.
Weighing the Pros and Cons
There are inherent risks and advantages to getting a private loan over a bank loan:
Risks:
Not clarifying both parties expectations. If you dont have a clear repayment plan and stick to it, its very easy to get behind or to never set the money aside to pay off the lump sum.
Relationships can be damaged when money gets involved. Your lender can resent feeling used or taken advantage of if you default. And either party can get hurt if they feel the money is being valued over the relationship.
Advantages:
Flexible termstypically the repayment doesnt start immediately, and you can create a payment schedule that works for both you and your lender.
Better interest...
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