Borrowing money from loved ones: what to consider | Fora Financial Blog
Borrowing Money from a Loved One for Your Business? Think Again
September 26, 2016

Borrowing Money from a Loved One for Your Business? Think Again

When running a small business, there may be times when you’ll find yourself in need of some extra capital. Whether you recently opened a small business and require financing to get it up and running, or have an existing business that is in need of cash to grow, it is always important to have money available.

If you’re in a bind, you may have considered borrowing money from family or friends. While this may seem like the perfect solution, it could cause a strain between you and the person you’re borrowing from. Consider the potential risks of asking a loved one for money for your business, and instead apply for a small business loan. In this post, we’ll explain these risks, and why working capital solutions from a lender may be a better alternative.

It may be awkward

Do you want every holiday gathering to be uncomfortable because you haven’t been able to pay back your parents? Probably not. By mixing business with pleasure, you may jeopardize these relationships. Borrowing money from family or friends for your business might seem like a win-win; you’ll have funds for your business, and you’ll be getting it from someone close to you. Unfortunately, this could become a source of tension, so apply for business working capital from a lender instead.

You’ll feel pressured to repay the amount quickly

The individual you borrowed from may not realize how long it will take to pay them back. If they aren’t a small business owner, they may not understand the wide variety of costs your business generates. You’ll likely want to repay your debt as soon as possible, which could cause you unnecessary anxiety. By applying for a small business loan, you’ll be given a set term and payment amount. The lender will tailor these factors to your business’s needs, so you won’t be financially stressed. If you borrow from a loved one, they may expect the entire amount repaid to them as soon as possible, which may not be feasible.


Borrowing won’t feel the same as receiving a gift

If you have a wealthy family member who wants to give you money for your business, that’s great! Their generosity will be a huge help to your business’s future. But if a loved one is temporarily loaning you money, that is a different story. This could create a difficult situation, where you feel guilty for borrowing money, and they are worried about getting the funds back.

So here’s why a small business loan is a smart alternative

Don’t worry, just because you aren’t borrowing money from family or friends doesn’t mean you can’t get the funds you need for your business! As we previously mentioned, there are working capital solutions that can be supplied to you by a recognized lender. These lenders will be able to assess your business’s financial health, and provide you with a set funding amount and term that you can handle. Although you’ll likely have consultative support from the lender, it won’t be too close to home, like borrowing from family or friends!

Hopefully you’ve been able to determine that borrowing from someone close to you might not be the best option. Apply for working capital from a lender, and you’ll be receive the money you need, without any family drama ensuing!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].