Small Business Loan vs. Borrowing from Friends & Family

Small Business Loan

Obviously it’s always wise to draw up a contract, but what if Grandma hands you a check for $1,000 and tells you to use it for your business? She’s not being clear if it’s a free and clear gift or a loan which she wants paid back. And by when? How much interest? With a small business loan, you’ll have all the details clearly laid out prior to taking the loan.

Less Able to Take Legal Action

If something goes wrong with the loan, both you and the lender face more difficulty if either party decides to take legal action. What really happened to the $500 cash payment that you gave to Aunt Sue but have no record of? Did she lose it? Spend it? Or, did you really give it to her? There will be far less hassle for you to make online payments on your lender’s secure website where there will be a record.

Gatherings Will Be Awkward

While you are indebted to a friend or family member, you have a high chance of avoiding them or feeling uncomfortable because you are in a position of owing them. How often are you invited to Thanksgiving dinner at your banker’s home? Even if your lender charges more interest than your parents would, it’s a small price to pay for enjoying your holiday dinner.

In almost any situation, it’s far better to get your small business loan from a certified lender than someone whom you have a close relationship with, as there are fewer consequences. You’ll spare hard feelings from both parties, be able to enjoy family functions and know that taking legal action, if necessary, won’t result in a family fight.

For more information, go to Small Business Loan at

Small Business Loan vs. Borrowing from Friends & Family was last modified: February 4th, 2012 by Amit Kraidman
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