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Family and Friends Are the Best to Raise Capital from for Your Business Start-Up

How to raise capital for business startup

Entrepreneur

Family and Friends Are the Best to Raise Capital from for Your Business Start-Up

To many, raising money to start a small business is a herculean task. Looking for money without knowing exactly in which direction to look can be frustrating and in some cases, dream-shattering.

Among the many options available to anyone who wants to start a business, family and friends are those you are likely to raise funds from in the easiest way.  Unlike banks, venture capitalist, crowd funding, commercially-oriented investors among others, the ease and cost of accessing funds from family and friends is comparatively less.

Related: 5 Ways family impacts your business positively

Ease

Family and friends understand us better than anyone. They understand and appreciate our zeal and goals more than any financial institution can claim to understand. They are in a better position to assess whether our desire to start a business and keep it alive is real or not. They know us and know when we are passionate about something or not. They can tell whether or not we are likely to succeed in a given venture. They know when we are passionate about a business idea. And they are likely to support us in any form including funding.

Cost

The cost of obtaining and using funds from friends and family can be cheaper than approaching conventional lenders and investors. Because of the non-business relationship we have with family and friends, they often do not charge commercial interest rates on funds advanced to other members of the family. If you are lucky, there would not be interest on it all. And if you are very lucky, you may not have to repay the money to them.

Amount

Often, family and friends may not be able to give you as much money as you can access from a financial institution or other investors. This limits you in terms of how much capital to raise to start your business or expand an existing one. If you are going to rely solely on family and friends for your funding needs, I advise you lower your expectation to fall within their financial abilities.

Timeliness

You may not always succeed at raising funds from family and friends. And when you do, you may not always succeed in obtaining the funds at the time you need it to start or expand or take advantage of opportunities flashed at you. The timing is often at their financial convenience.

See Also: 5 Strategies these billionaires used to get rich

You would be surprised at how much you can raise from family and friends, the cost, and how easy it can be. You have to be trustworthy, and you must work hard with whatever amount you are able to raise so you can repay them, and grant other members of the family an opportunity to also access money from the kind-hearted and capable ones.

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