The loan agreement
Are you trying to get a franchise off the ground? Do you need help financially? You first choice may be asking a family member for money. There are negatives and positives in asking a family member for financial help. Asking for money is definitely a tough question to ask family and doesn’t always go over well.
Before you ask a family member for money you may want to think it through. Here are some things to think about.
Before talking to a family member you want to get your agreement in writing. Just like going to an institution, you want to be as professional as possible by having all the details to lay out for them. Your family member should be in complete agreement of your written documents.
You want to look for family members that will be lenders rather than investors. When you sign off a loan agreement with a family member, the only thing you are required to do is pay the money back with interest. However, when a family member wants to invest, there is much caution that needs to be taken. This can cause a lot of tension in families.
When asking a family member to sign a loan agreement, don’t underestimate the power of money. Money causes a lot of heartache in families. To avoid this, make sure that you family member understands the agreement that he or she is about to sign.
Once you get a family member to sign make sure to pay the loan as you go. All you have to do to make this happen is set a fixed percent of your franchise’s cash-flow to immediately give to your lending relative. This will be the fastest way to eliminate your debt and will keep you from stressing.
Last thing you should remember is to be completely honest with your family members. Do not let them think there is no way of you failing. Be blunt by letting them know all the risks involved with lending you money. Let them know that there may be a chance that they won’t get their money back.
So be careful getting into a loan agreement with family. Be prepared.
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