Who Is a Better Source of Startup Funds for a Business: Banks or Family?
It is a good idea to start the new year with gratitude. For example, if your New Year’s resolution involves making a budget where you save more money or put more money toward debt repayment, it means that your income is high enough that you can afford to reduce your spending. Likewise, if you resolve to consolidate your debt, it means that your credit score is high enough to qualify for a debt consolidation loan. Likewise, if you are planning to start a new business project, and you are trying to choose between taking out a loan from a bank or borrowing an equivalent amount of money from a family member, it means that, not only do you qualify for bank loans, but you also have at least one family member who can afford to lend you money. The inability to repay your loan to either of these parties can certainly cause problems, and there are pros and cons of borrowing from each. To find out more about starting a small business without wrecking your finances, contact a Plantation debt lawyer.
Banks Are a Better Judge of Whether You Can Pay Them Back, or Are They?
The obvious reason to choose borrowing from family instead of borrowing from a bank is that your family is unlikely to pursue legal action against you if it takes you longer than originally planned to start making payments. If you want to lower your monthly payments on a family loan, all you have to do is ask. Of course, if you default on a family loan, it can cause a strain on your relationship with the family member who lent the money, as well as with other family members, for a long time.
Another important difference is that banks do a credit check before deciding to lend to you, whereas family members usually do not. When you apply for a small business loan, you present your business plan, and people who do not know you review it. Based on the business plan and on your prior credit history, the bank decides how much it is willing to lend and how much interest it will charge. Therefore, the bank will not lend you money at all unless there is a good chance that you will be able to pay it back. By contrast, family members may lend to you simply because you are family. On the other hand, they may be reluctant to lend because they still think of you as a much younger and less responsible version of yourself. If this happens, though, you may be able to change the family lender’s mind by mentioning financial obligations that you are currently keeping or which you have recently fulfilled.
Work With a Debt Lawyer About Starting a Business Project in the New Year
A South Florida debt lawyer can help you avoid the mistakes that caused your previous debt problems as you embark on a new business venture this year. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.
Source:
inc.com/steve-strauss/3-counterintuitive-business-strategies-that-made-shark-tanks-lori-greiner-a-multimillionaire.html
