Business finances are a very crucial part of starting a business or even running one successfully. Raising money for your business is not an easy task and when it is seeking loan from people you know, the job may be a little more difficult. Bank loans have protocols that you need to follow but when it comes to finding loan from friends and relatives there is so much you need to do and think before making an approach. Let us find out how easy or difficult this can be.
Your approach for an informal loan
- Entrepreneurs: Veteran entrepreneurs who know the tricks of the trade and have been in business for quite some years, sometime are willing to offer informal loans for businesses. Of course, you must approach wealthy entrepreneurs who can afford to offer financing.
- Pay attention to personal relationships: Individuals who are on a fixed monthly income may not be the right people to approach for financing. They cannot afford to lose their income and may not agree to offer any personal loans. Moreover, you also need to be at ease with the person you borrow money from. Make sure your personal relationships do not get strained due to this. It is also advisable that you do not borrow money from someone who may be impatient.
- Preparation for your business: Even if you are seeking business finance from a personal source, make sure you have a business plan and explain to your financers what profit you have planned for them. Your financers have the right to know how you plan to invest their money and what they will receive in return. Remember, they are looking for security while investing in your business.
- Make a written plan: Convey your business ideas in writing with your financers. Use your e-mail to convey your ideas. In fact, you may also invite different prospective financers to discuss any details of the project with you. Make this an interactive session where they can find out how their money will be invested and what profit margins you may be expecting from your business.
- Seek advice: You may keep your approach more friendly and informal by involving your financers in your business ideas. If asking for business finance directly is not your cup of tea, ask for advice instead. Enlighten your financers with your business ideas and seek their advice and you never know they might offer you financial support as well.
- Make financing suggestions: You may have a fixed amount in mind for your business but laying that amount on the table may scare your prospective financers. Instead, offer a range and see what your financer may be comfortable in offering. In addition, you should also offer an interesting return to grab their attention.
- Make an informal approach: Since this will be an informal business finance, make the approach informal too. Make the financing request yourself because a personal approach will be appreciated by the financer. In addition, he or she will also be comfortable knowing the person and the business well before lending any money.
Despite everything being informal, make sure you have a professional approach as well. They should not feel that their money may be handled in an immature manner. Provide a security of words.
Kevin is a skilled business planner and has composed several business finance articles to help small and big businesses. He is also an avid blogger and you will find his articles on several finance websites. He is presently associated with Mate-loans.com which is a platform for various online loans.