In this Tuesday Teaser, I want to talk about where to find funding for your business idea. If your idea requires a certain amount of money to get started, you might want to try asking your parents, family members and even close friends for some early cash in the beginning.
There are numerous pros to borrowing money from your parents (though there can be a few cons as well). The payback plan may be flexible, at low or no interest rate, and you hopefully have their full support of your entrepreneurial business idea.
Over the next few segments, I’ll talk a bit more about funding sources. If you have some ideas to share about funding, please put ‘em in the comments below!
Dave Soltau: At this point, your crazy business idea is rolling. You’ve completed your business plan, but how do you plan on financing this idea? Do you go Wells Fargo, ask for a loan? Do you dip into your checking or savings account? Do you reach out to the bank of mom and ask her if you can borrow a few bucks?
Come with me as we discuss all those options. You’ll forget about sweat equity. My opinion, it is where you begin. Let’s talk about it.
Let’s talk about the pros of borrowing from mom and dad, shall we? Some of the pros, number one, low-interest rate or no interest at all, “Thanks, Dad.” Number two, pretty flexible when it comes to paying them back, “Dad, I can’t pay you this week, but maybe I can pay you next week.” There’s no collateral required, why? Because they know where you live.
Number four, less paperwork, although you may have a contract with your parents. It could be a one-pager. It’s still a legal binding contract. Number five, it’s time savings. Pick up the phone, “Mom, I’ve got this crazy idea. Any chance, I can borrow some money from you?”
Number six, I don’t think your mom’s going to check your credit history, or come back and say, “Dave, your credit score is not at least 760. I can’t let you borrow $5,000.” The final reason, ladies and gentlemen, it’s a good option for startups.
Again, you are going to require significant amounts of money to get off the ground, final. That can be a couple of thousand bucks, up to 10 or 20,000. That’s a lot of money for most. Now I didn’t hesitate to talk about borrowing money from family from a pro’s perspective. Let’s talk about the cons, shall we?
Dave: In summary, am I a fan of borrowing money from mom and dad?