A Great Way to Free Financing for Small Business

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Along with self-financing, this can be another great source to free financing for small business. But be careful. If you're unsure you can pay back the money, it can destroy relationships. That's why it's vital that you first believe in the viability of your venture before you start seeking financial help. Otherwise, it can mean disaster. On the flip side, it's the second easiest form of financing. You've already built strong relations with them, adding to your credibility that you can pay back their loans. If they have the finances, they'll normally grant you a loan if they like your business acumen. You can expect the loans to be interest-free or at low interest rates. What to Do Pitch the person as you would any other lender. Be professional, and show financial statements and tax returns if needed. First, approach the person you'd feel comfortable in borrowing. Then present your business ideas. They will ask you a lot of questions. Don't be too secretive. It's their money at stake, so answer your questions fully. You'll need to present a formal business plan. We've said before, you wouldn't need this to build your company; but you'll need it in this case because you'll be using someone else's money. If They Say No Don't be too distraught if they decline your request. Use it as a feedback that there are some holes in your business plan. Ask them why they rejected your proposal. You'll get some great insights on improving your ideas for the future. And if they say yes? Put it into writing. It's important to write everything down about the loan agreement. Specify legal responsibilities for both parties. State when the loan should be paid back. You don't want to get into bitter fights with your loved ones. Communication is Key If your investors don't plan on being active in your company, keep them in constant contact with how the business is doing. It's a nice gesture to let them know how well their investment is going. Doing it once a month would send a good signal. Importantly, make sure you send them periodic payments to repay for their investment. If done correctly, friends and family is a great source to free financing for small business.

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Posted on February 18

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