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Investment from Friends & Relatives

When you ask those you know for a loan, the first hurdle you must overcome is your reputation and all your past sins. You might no longer do the foolish things of the past that maybe some friends and relatives have indelibly etched in their memories. Your new business plan will update your friends and relatives to the current you and prove that you are responsible with their cash. You must reposition your past as a time full of rich learning experiences from which you will now earn yourself and others a fortune.

You'll probably have to work extra hard to prove that you know what you're doing. Thorough market research will help demonstrate that your business makes sense.

I think it is important that you make it clear that you are in charge. Accepting an investment from family and friends opens you up to a variety of emotional hooks and distractions beyond that of most investors. The last thing you need is loved ones telling you how to run your business.

An advantage to having friends and family invest in your business is that it keeps the money in the family or community. If it's a failure, then you run less risk of repossessions and you enjoy some slack, but you'll have to pay everyone back or make good. Otherwise you'll never hear the end of it

Finally, you'll need to overcome any emotional entanglement as you present your plan. I was very annoyed by most of my grandmother's questions before she gave me $5,000 for my do-it-yourself used car lot. Don't be distracted by your emotional reactions. Certainly any questions are reasonable and any investor would ask them, so treat your friends and family with the professionalism you'd present to a stranger. This will be key in overcoming past indiscretions and proving your maturity to manage your friends' and family's cash well.

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