You, your family and friends are the stars of this stage. Think personal savings or a home equity loan. Many successful business owners who couldn’t access funding from traditional lenders were able to raise money with the help of friends and family. Like with any type of borrowing, there are risks and rewards with asking for money from people in your network.
It’s important to spend the necessary time to really develop a good service or product, test it and refine its quality. Once you’re ready, these friends and family members will be your best test market. As they become more excited about your business, they will likely become more interested in investing in your business.
Be careful. It’s important to always put in writing your agreements around money, especially with friends and family, so that everyone is clear at the outset what the investment is and what is the bargained for exchange.
There’s several forms of lending by friends and family:
- Private loans
- Local Investment Networks
The following articles give some timely tips on using personal resources to fund your business.
- Asking Friends and Family for Funding (Entrepreneur)
- How to Get Funding From Friends and Family (Entrepreneur)
- Putting Personal Money into a Business in 7 Steps (Fit Small Business)