There are sources for small business funding other than a bank loan or credit cards. After you put your own financial house in order, sell assets and create a frugal budget to fund your business, you should consider reaching out to family. One or more family members may be willing to help, if you approach them the right way.
Apply an Even Higher Standard
Don't take a lackadaisical approach when you reach out to family for small business funding. Treat them the same way you would a rich venture capitalist. Prepare a business plan and an accompanying presentation. Have copies of your business plan to share with each person you plan to speak with, and use PowerPoint, a video or other multi-media presentation if you can to generate excitement. Go the extra mile in your business plan presentation, and apply an even higher standard for selling them on the idea of funding your business (then you would a banker).
Don't Guilt Trip
You're not entitled to small business funding from family members, simply because you're a part of the family. It's true that families should help each other out financially in emergencies or in desperate situations. Launching a business doesn't often fall into one of these categories, even though it feels like it. Manipulating family or making them feel guilty is wrong, and may turn them off from ever funding your venture.
Clean Up Your Act First
It's understandable when your family is hesitant to offer you any small business funding, if you have a history of mismanaging money or being irresponsible. A savvy business plan and presentation won't change that history. You'll have to demonstrate to them that you've changed your ways and are responsible enough to handle a business venture. Just saying so doesn't work either. Be ready to show evidence that you've resolved whatever the previous issues were, or that you are on the road to a new start.
What They Get in Return
Set boundaries in your own mind as to what each family member gets in return for funding your business. Some family members may request something that's not worth giving up in exchange for their investment. For example, your brother-in-law may agree to give you all the money for your start up costs, in exchange for a 50 percent ownership in your business. Don't wait until they make a demand before you make a decision. Decide ahead of time what they will get in return, and set limits.
Don't Approach Everybody
There are some family members that you shouldn't approach for small business funding. One group to stay away from is anyone that doesn't have your best interest at heart. They will expect you to share your business with them, and they might try to undermine it. Another group consists of people who would suffer financial hardship in their attempts to help you. For example, you may have a sister who is raising children as a single mom. She loves you so much, she would never say "no." She will make sacrifices that may negatively affect her household to help you. Be kind and don't ask family members like that in the first place.
Follow these guidelines when reaching out to family for small business funding, and you'll avoid resentment or being taken advantage of.
Daphne Mallory, Esq. is
the co-owner of Mallory Writing Services and has written more than 100
articles helping home based business owners and entrepreneurs start and
market their business. You can learn more about her here.
- Starting Your Business
- Start-up financing
- Reaching Out to Family for Small Business Funding
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