Family and friends are often the first people entrepreneurs turn to for funding when starting their business. It’s an attractive option for many reasons. Not only is it less intimidating than applying for a loan from a bank, but it can also provide the funds you need quickly, without having to jump through hoops. In this blog post, we’ll explore the benefits of using family and friends to get money for small businesses and start-ups.
1. Low-Interest Rates
One of the primary benefits of seeking funding from family and friends is the low interest rate. Compared to loan interest rates from banks, which can range from 4-7%, the interest rate for a loan from family or friends can be as low as 0%. That’s because family and friends are more likely to offer a loan as an act of kindness and support rather than as an investment.
2. Flexible Repayment Plans
Another advantage of getting money from family or friends is that they’re often willing to offer flexible repayment plans. They understand that launching a business is not always a smooth process and that there may be times when you’re unable to make a payment on time. As long as you’re honest and open about your situation, they’ll be more likely to work with you and come up with a repayment plan that’s manageable for you both.
3. No Collateral Required
When applying for a loan from a bank, you’ll usually need to provide collateral, such as property or assets. This is not the case when getting money from family or friends. They’re usually willing to offer the loan without requiring any type of collateral.
4. Quick and Easy Application Process
The application process for a loan from a bank can take weeks, if not months. This can be a major hurdle for entrepreneurs looking to get their business off the ground quickly. On the other hand, getting money from family or friends is usually a much quicker process. All you need to do is explain your business idea and why you need the loan.
5. Personal Support
Family and friends are often a great source of emotional support. Starting a business can be a stressful and overwhelming process, and having people close to you who understand and believe in your vision can be a major source of comfort and motivation.
Conclusion
Using family and friends to get money for small businesses and start-ups has many advantages. Low interest rates, flexible repayment plans, no collateral required, and a quick and easy application process are just a few of the benefits. Additionally, having personal support from those close to you can make the process of getting your business off the ground much less stressful.
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