Daily Business Zen: Mom can I borrow $1,000,000?
Most of us in Generation X and Y grew up with the mantra: Don’t mix family and business. But is that still true? Marshall Loeb at Foxbusiness.com challenges us to forget that maxim:
“Does the idea of hitting up family or friends for cash make you cringe? You may be forgetting that the people close to you might actually be happy to loan you money…Family and friends also won’t charge you loan application fees, which can amount to thousands of dollars at institutional lenders. They probably won’t require that you have a good credit score either, or fill out scads of application forms. You qualify as long as your lender trusts that you’ll pay the money back.”
Is this a good practice? Some think so, but do you?
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I stick by keeping family out of business matters. Only borrow money from family/friends if you can pay the money back immediately. It puts a strain on any non-business relationship when there is a debt involved, and it prevents you from escaping from the stress of business when you are with friends/family.
It’s always better to seek funds from someone that will make it official and binding through a business agreement and who fully understands your business. Anyone who gives you many should have a stake in your business and not just you.
I would never ever borrow money from family, with one exception. Right after I landed my first job and moved out of the house, I had my debit card stolen and had my checking account cleaned out. I borrowed just enough from my parents to pay my bills for the month and the second I got my money returned from the bank, the money went back to my folks. I didn’t like doing it, but bills must be paid and I knew it would be interest free. I hope I never have to do it again; I felt ashamed of myself that I had let the whole situation happen.
Jacob – That is a good strategy to only borrow if you can repay them immediately. Often however, that is small money we are talking about. Fortunately for me, my family would not be able to loan me any significant amount of money!
Kate – I know how you feel. I had to borrow a few months of money from my Mother between the time I finished school and started work. My campus job ended, and I ended up living in IL and working with my father in a factory just to pay the rent on my apartment in Milwaukee until my “grown up” job began. It helped offset any expenses my Mom and Dad were helping to pay in that time off. Thanks for the comment!
I think it depends on your family. Granted I generally wouldn’t want to borrow money and have never borrowed money of any substantial amount from my parents but based on my past performance I would not have a problem with it. My family has known from very early on that I will own my own business one day and I have been very successful up to this point. So if I needed to borrow some money, I know I could pay it back and they know I can/will pay it back. My family has always been supportive of my business ideas and without them I wouldn’t be here. I guess I have a different view on this subject.