With banks and other traditional funding avenues becoming more and more stringent with financing small businesses, many new entrepreneurs are laying their hope other alternatives to acquire the money they need to breathe life into their startups.
Funding from friends and family is one of the most common forms of startup funding for a good reason: banks and investors might not care for you as much as to risk their money on you, but those who are close to you and know you well might be willing to take a chance on your infant business.
Loans are arguably the best way for friends and family to back a business, because not only is the money in most cases enough, but lenders also agree on more favorable repayment terms than would be otherwise offered by a third-party agency.
The benefits of pulling family and friends together to see your vision through.
For a good number of entrepreneurs, this is one of the best chances they have of securing money to get a business off the ground. People close to you will always support your cause more generously than third-party contributors.
Furthermore, if a few of them have knowledge or skills that might be directly applicable to your business, bringing them on as partners and investors will transform them from simple contributors to motivated advisors.
In the unfortunate event that your startup doesn’t turn out as expected, friends and family will often be more forgiving than outside lenders and investors, and will even try to pull you back up.
Raising money from your personal network not only saves you money by avoiding creditors, but also sets you up for future investors who will be thoroughly impressed by the number of people you have rallying behind your business plan.
Always have a fallback plan.
In the eventuality that your friends and family do not end up raising enough for your business to spread its wings, it helps if you had an alternative funding initiative. Traditional lending institutions might not be as inviting but luckily, independent companies exist to give your business the financial jolt it desperately needs.
Online lenders aside, signing up with cash advance providers such as First American Merchant is a reasonable way for getting enough money to start and your small business.