Raising Money From Friends and Family Part 1 of 2: Document Your Loan
How To Raise Money Through Friends and Family
If you are building a business or you have built a business you have already come to the conclusion that you need cash flow and capital. As an entrepreneur who is building a business, the costs of owning the business are continually increasing and it is hard to project the unknown costs of doing business especially in these economic times. Sales projections and inventory control are not as easy, and you need to be able to build your business without concerns about money. Even in a good economy, Entrepreneurs need cash flow, especially if they are still in the start-up phase.
Raising Capital From Friends and Family Part 1 of 2: Document Your Loan
If you have no current investors, the next best bet is your family and friends. Today loans from family and friends are an immense industry. Over 21 million Canadians lend money between friends and family, it is a billion dollar industry.
http://www.Kasu.ca does nothing but facilitate such loans in Canada. They supply the documentation and give the entire transaction a solid legal basis. The website is also available at http://www.documentyourloan.com.
The fact that other major companies in the US, such as Virgin Money with $450 million in loans facilitated total ending 3rd quarter 2009 and Lending Karma lending over $140 million, which is an indication that family members are more comfortable with lending substantial sums if the loan is properly formalized. The lender will need the extra security and payment schedule to show the loan is serious. When approaching a family member make it clear that a formal contract will be drawn up by www.kasu.ca which has been developed by an attorney specifically for friends and family loans.
If you are lucky enough to come from a business family, you may not only get the capital you need, but may also receive good advice that in the long run may be more valuable than money. But remember that even your closest family and dearest friends have to look after their interests. You may need to enter into a deal in which the business repays the loan eventually and the investor still retains a minority shareholding in the business. The main effect this will have on your business is that when the day comes to sell it, your investor will receive his or her share of the proceeds. A major advantage of borrowing from those close to you is that usually no collateral is required.
Treat your family like anyone else, the same way you have to prepare a presentation, prepare and do your homework before approaching them to give them and yourself the best possible outlook on how the money will help you, and how you can pay it back. You cannot expect people to hand over money blindly even if it is “love money.”
Above all else, no matter who you are dealing with, be honest to them and yourself and document your loan. www.documentyourloan.com.
What documents lenders or borrowers give to pay back loans: