Friends & Family Loan Terms & Skills

Friends & Family Loan Terms & Skills

Family and friends may be a great supply for startup funding. You likely won’t want to pay the gift tax on that amount of money while they may be willing to donate the money to your startup. Alternatively, you can easily either structure it as financing or you can offer them stocks of the business.

Unless your friends and relations are advanced investors, using cash as that loan is normally cleaner than attempting to sell them a share associated with company for three reasons:

  1. Undesirable company advice: also tiny equity owners might think that they will have the straight to have a significant say into the strategy and operations for the company. May very well not wish to be constantly getting company advice from your uncle.
  2. Potentially impractical company valuations: The founders of a fresh company tend to spot impractical valuations in the company. To prevent providing relatives and buddies a “bad” deal, a loan that will pay an excellent interest may be the fairest approach. Continue reading