Get Your Business Funded: Creative Methods for Getting the Money You Need

The Ubiquitous Option

It is probably safe to say that many, if not most, small businesses begin with at least some funding from friends and/or family members. It could be a gift of money from dad or a low-interest loan from Lew, but whatever the case, a capital infusion from someone close can often mean the difference between launching and flailing.

A report from Angel Capital Education Foundation says that the total amount of investment stemming from venture capitalists, state funds, and angel investors is roughly $20 billion a year. The amount from friends and family? About three times that amount.

It is not hard to understand why people turn to family and friends. Ready money and sweet deals are hard to beat, especially when startups have no track record. They have no sales. They have little equity, and often no collateral. What they do have is an enthusiastic entrepreneur with a super idea, a lot of promises, and even more hope. But since hope doesn't pay the bills, and charisma cannot collateralize a loan, mom and dad are often the funding choice of first, and last, resort.

It doesn't hurt either that a yes may not be that hard to get, or that they believe in your vision and are willing to give you some pretty incredible terms. Indeed, many a family loan includes terms that are otherwise unheard of: repayment beginning only after the business starts to turn a profit, interest rates at 0 percent, forgiveness of outstanding debts after a certain amount of time, and so forth. ...