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Business Loans Versus Borrowing From Family: Pros and Cons
It often takes a year or more for new business ventures to be more profitable. You might spend your first round of startup funding on business costs but then need to borrow more to keep it going. You are in good company if your New Year’s resolution is to start a business, but you do not have much capital with which to do it. Your options are to take out a personal loan and use it to fund your business or to borrow from a family member if you are fortunate enough to have a family member who has enough money to lend. In either case, the early stages of entrepreneurship can place stress on your finances and on your relationships with the people closest to you. You will be in a better position to pursue either option if you first tackle your existing debts or make a plan to do so at the same time as you get started on your new business venture. If the debts from your last business venture are still following you around, contact an Oakland lawsuits, collections, and creditor harassment lawyer.
Mom Does Not Care About Your Credit Score
Borrowing money from family members to start a business has its obvious advantages. Family members do not charge you late fees if you are late with an installment payment and interest rates if your family charges interest at all. They usually do not ask for a credit check, either. If you want to extend the repayment term, all you have to do is ask.
The trouble is that unless you are very wealthy, the money your family can afford to lend you is not enough to get your business very far unless your business has low startup costs. Even worse, if you default on a loan from the bank, the worst that can happen is that the bank sues you, and you get your paychecks garnished. As painful as that might be, it hurts less than falling out with a close family member.
Banks Do Not Give You a Guilt Trip at Thanksgiving Dinner
According to Shark Tank investor Lori Greiner, borrowing from a bank is the safer option for starting a business, even if your family offers a loan with irresistible terms. In order to get the loan, you will have to show that you have a detailed plan for how to use the money, and professional lenders are in a better position to judge whether your project is likely to succeed than your family is. Furthermore, professional lenders understand better than your family does that it takes time for a business to become profitable.
Contact the Law Office of Melanie Tavare About Borrowing Wisely
A debt relief lawyer can help you get your finances in order so that you can borrow money on favorable terms to start a business. Contact the Law Office of Melanie Tavare in Oakland, California, or call (510)255-4646 for a free case evaluation.
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