How to Borrow Money from People You Know For Your Business
Look for those in your circle who themselves are entrepreneurs., Be prepared., Suggest a range, instead of a fixed amount., When you reach verbal agreement, shake on it and promise to send a draft agreement in the mail., Treat the agreement the way...
Step-by-Step Guide
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Step 1: Look for those in your circle who themselves are entrepreneurs.
Seek an older, wealthy individual who has been or still is an entrepreneur.
Studies show that these folks are most likely to make informal loans and investments in the businesses of people they know. -
Step 2: Be prepared.
Have a business plan ready, and know how much you need.
Even Grandma Mabel deserves a good description of how you plan to use the money and when you will repay her.
Decide in advance of the request: how much you need, what interest rate you’ll pay, and what kind of repayment plan and security you can offer. , When you finally start talking about money, your supporters like to feel that they are deciding the amount.
If you don’t feel comfortable using a range, suggest up to three options where the amount, interest rate and loan term vary. , Although your discussions up to this point can be informal, at this point its time to formalize the deal. , If it’s a gift, you only need a letter from the giver.
If it’s a loan, you need to sign a promissory note which includes the loan terms to which both parties previously agreed. , An attorney, a financial adviser, an accountant or a private loan servicing company can do this for you.
Your lender will feel more confident knowing that the agreement is a business one with a legally binding contract. -
Step 3: Suggest a range
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Step 4: instead of a fixed amount.
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Step 5: When you reach verbal agreement
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Step 6: shake on it and promise to send a draft agreement in the mail.
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Step 7: Treat the agreement the way you would if it were from a stranger
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Step 8: and everyone will feel more confident.
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Step 9: Offer to have the loan formalized and managed by a professional.
Detailed Guide
Seek an older, wealthy individual who has been or still is an entrepreneur.
Studies show that these folks are most likely to make informal loans and investments in the businesses of people they know.
Have a business plan ready, and know how much you need.
Even Grandma Mabel deserves a good description of how you plan to use the money and when you will repay her.
Decide in advance of the request: how much you need, what interest rate you’ll pay, and what kind of repayment plan and security you can offer. , When you finally start talking about money, your supporters like to feel that they are deciding the amount.
If you don’t feel comfortable using a range, suggest up to three options where the amount, interest rate and loan term vary. , Although your discussions up to this point can be informal, at this point its time to formalize the deal. , If it’s a gift, you only need a letter from the giver.
If it’s a loan, you need to sign a promissory note which includes the loan terms to which both parties previously agreed. , An attorney, a financial adviser, an accountant or a private loan servicing company can do this for you.
Your lender will feel more confident knowing that the agreement is a business one with a legally binding contract.
About the Author
Helen Ortiz
Dedicated to helping readers learn new skills in crafts and beyond.
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