Should Aspiring Entrepreneurs Take Out a Loan or Borrow From Family?
Many families include at least one member who is full of ideas for business projects but never has two pennies to run together and another who is boring but financially secure. All of those YouTube channels designed to get you psyched about entrepreneurship would never tell you this, but sticking with your boring salaried job for years and years and living below your means is a good way to end up in a position where you can afford to lend other people money. Borrowing money from relatives is a popular way to get funding for a business, among aspiring entrepreneurs lucky enough to have a family connection to someone who has money to lend. Just because a family member is willing to lend you money to start a business, it does not always mean that it is the best option. In some cases, it is better to take out a loan from a bank. If you have learned a counterintuitive lesson about money only after suffering financial losses, contact a Philadelphia debt relief lawyer.
Paying Your Uncle Back Probably Won’t Raise Your Credit Score
If you are planning to borrow money so that you can use it toward income-generating purposes, as opposed to using it to pay medical bills, credit card debt, or overdue taxes, then raising your credit score so that you can borrow larger amounts in the future should be part of your long-term strategy. Loans from family members tend to be informal in terms of repayment schedule, and the relative who lent you the money is unlikely to report it to the credit reporting bureaus when you pay back the money.
Your Dad Probably Won’t Sue You If You Don’t Pay Him Back
Of course, the obvious reason to borrow money from a relative instead of from a bank is that your family sees you as a human being, and one with whom they share a lifetime of memories, instead of just another debt to make money off of. Therefore, if you cannot afford to make an installment payment by the date you promised, all you have to do is say this to the family member who lent you the money. Unpaid loans between family members can lead to strained relationships, but a family member who lends you money is unlikely to sue you if you don’t repay the loan, unless he or she is in the habit of using the courts as a means of dispute resolution.
Perhaps the best reason to borrow from a bank instead of a relative is the vetting process. For better or worse, a bank will not lend you money unless you have proven that you are likely to pay it back, whereas a family member may lend you money simply because you are family.
Contact Louis S. Schwartz About Coping With Debts You Can’t Repay
A Philadelphia consumer law attorney can help you negotiate or consolidate to deal with debts that you are struggling to repay. Contact Louis S. Schwartz at CONSUMERLAWPA.com to set up a free, confidential consultation.
Source:
inc.com/steve-strauss/3-counterintuitive-business-strategies-that-made-shark-tanks-lori-greiner-a-multimillionaire.html
