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Thread: Taking Money from Family and Friends

  1. #11
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    mr.ro's Avatar

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    This is a tricky subject I should know I got the capital for my company from my dad and it has not gone bad. Granted he didn't care about the money because he could stand to lose it. If it wasn't for that it would have taking me a long time to save for that money but now that I'm on my feet I think he is proud of me for taking this idea a making the money back.

    So I would say just don't throw your life savings in it and hope it turns out good because if it doesn't then you both are gonna be in bad shape.

  2. #12
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    I've always been of the opinion that I shouldn't "loan" money to family and friends that I had to have back. Likewise I won't borrow money from family and friends that they really need to depend on. I hate to borrow money for anything but recently we found ourselves in a bit of a pickle and borrowed some money from my Grandmother that we are paying back at a higher interest than she was earning at the bank. If something happened and we were never able to pay her back, she has so much money in the bank that it wouldn't matter. My Dad offered to loan us the money instead - it would have been simpler and he wouldn't have charged us interest but if something happened and we were never able to pay him back it would have been really bad for him right now so we borrowed from my Grandmother instead. I think I'd want to follow the same policy if I was borrowing money to try a business venture!
    ~Jenn
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  3. #13
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    I definitely wouldn't borrow money unless I knew whomever I borrowed from could spare it. I think that's just common sense.

    Still, I'm always leery of borrowing from family or friends. It just seems like too much of a minefield. Particularly if you're starting a business.

  4. #14
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    Quote Originally Posted by KristineS View Post
    Still, I'm always leery of borrowing from family or friends. It just seems like too much of a minefield. Particularly if you're starting a business.
    Exactly! I think a business should be started with capital that you have saved or that you borrow from a bank.
    ~Jenn
    Crazy Dog Creative: Graphic Design and Marketing

  5. #15
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    I say why not. If you are willing to take money from a bank (which is other depositors money - could even be from your friends and family) why not from those close to you and know you best.

    If you have doubts, you should not be in business in the first place. Your should protect yourself with a strong written agreement and they should protect themselves with a strong written agreement.

    If you keep this part of your relationship very business like, it will be treated very business like by all parties.

    If you have concerns about asking for money, talk to them about your concerns as well.
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  6. #16
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    The concept between borrowing from family and borrowing from a bank is quite different.

    Say i have an account with ABC bank and my brother goes to ABC bank and borrows money from them. While he may borrow the money that i deposit in that bank, known to me or not, i am not going to be taking any of the risk. The bank takes all the risk. If my brother defaults on that loan and does not pay the money to the bank, i have lost nothing, because it is the bank taking on the responsibility of lending the money. Maybe i would be worried if the bank had all the loans they had defaulting. But in general the money in my account would in no way be linked to the performance of that individual loan.

    Whereas if my brother came to me to borrow money and i lent him the money, and he was to stop paying it back. I end up having all kinds of trouble. Even considering that i could get a secure document put together to ensure recourse in the event he stopped paying, if i followed that through there are potentially plenty of further reaching ramifications in a family environment that could lead to problems. Many of which may not have any bearing on a business decision, however they have plenty of swing in your personal relationships. Just saying that you keep this part business is very very rarely going to have any sway after the fact of there being a problem.
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