For the vast majority of entrepreneurs or people looking to start a business, they don’t have the money to fund their business on-hand. While you can try finding financial resources through measures like loans or lines of credit, you can also try to tap into resources a little closer to home. Family and friends can be great people to turn to when you’re looking to start a new business. However, talking to them about money might be a little uncomfortable for you. So to help you make having these conversations a little less awkward, here are three tips for soliciting business investment money from family and friends.
Know What Type Of Funding Are You Looking For
When you’re first starting a business, money is likely very scarce. Knowing this, it might be tempting to try to get any and all money that you can. However, this could be a mistake when asking for financial assistance from friends or family. According to Tony Armstrong, a contributor to NerdWallet.com, it’s important to know what type of funding you’re looking for and what you’re willing to give back to the contributors from your business. Some people may be simply looking for financial loans while others might want to offer stake in the business. Be careful that the type of funding you get is the actual type you want.
Don’t Simply Ask Everyone
As was stated previously, it can be hard to be selective about who you let invest in your business when you’re in need of financing. But in order to keep both your professional and personal life in balance, Caron Beesley, a contributor to the U.S. Small Business Administration blog, warns that you should only ask people who know of the risk they’re taking and can afford to make those risks. While the benefits of having a successful business could be financially beneficial to those who invest in your business, a loss of money with nothing to show for it could strain your relationships, so be aware of these risks for yourself.
Once you’ve decide what type of funding you’re seeking and the people you know who might be willing to assist you with this, it’s time to prepare your pitch. Nicole Fallon, a contributor to Business News Daily, writes that in order to have the most successful pitch, you’ve got to be professional regardless of how well you know the people you’re pitching to. Create a business plan and come prepared to talk about why you need financing, how you’ll spend the money, and how you plan to repay the lender or give the investor a return on their investment. If you’re picked the right business-minded people, they should have some questions for you before they agree to help fund your business, so expect to be asked some tough questions and have your answers ready.
Your friends and family want to see you succeed. And if you need their help, some are likely more than willing to oblige. Consider using the tips mentioned above if you’re planning to solicit your friends or family for a business investment in the near future.