Important things to Consider Before asking relatives for Business Fund
When you are sourcing funds for your business, your family or relatives are the first option that will come to your mind . This is because they are the best people who will want to listen to your ideas , before supporting you. Here are the essential things you need to consider before asking relatives for funds.
State Ideas Clearly: State your ideas clearly, ask questions and understand the terms and conditions involved. For instance is this fund free?, Am i going to pay back? is it a loan? or is it an equity?. Asking these questions will enable you to understand the terms and conditions clearly. Also endeavour you write the agreement down, because there are sometimes people might deny the agreement you had.
Be ready to fund back: When you ask your family or relatives for funds, be very ready to fund back. Make sure you go into the right business that will bring profit and have a long term plan for your business. Also understand the principles and rudiment of the business before starting it, to avoid failure. If you tend not to fund back to your relatives, they will lose trust in you and won’t want to invest in your business again.
Have a third party advisor: Having a third party advisor is very essential. The both parties should have a professional advisory to protect their interest in case of any issue that might escalate.Your professional advisory will protect and defend you.
Have a contract : Make sure you have a signed contract for your business, this is very important. If you don’t know how to create one, you can check online for templates. Incase of any situation that wants to transpire, the contract will save you. If there is no contract you aren’t communicating that the business is serious.
Let it be strictly Business: Ensure you avoid saying because it is my family they would understand. Business is business, when you agree a thing it cannot be validated. Treat your family or relatives as you would do for others. Avoid asking for funds you know you wouldn’t pay back, instead ask for a minimum investment and give pay back as at when due.
Risks: Taking risks is bound to happen in a business, if you aren’t liable to take risks then,business is not for you. Ensure you communicate the risks that are likely to happen to your business to your family. Let them understand the failure rate for your start up business . Without educating them, the relationship you have might suffer if what they have funded doesn’t yield a result.