Finding sources of funding for your business can be difficult but at some point, every successful entrepreneur needs to get started and take that leap. We have previously covered the Advantages and Disadvantages of Borrowing from Loved Ones, in this post we examine how to ask your parents for start-up money. No matter your relationship with your parents, this could be a daunting task, keeping this in mind follow these guidelines to borrow money to start your business:
• Ensure that you have run through your personal savings:
While your parents are part of your support structure, it would be unfair to ask them to invest and risk their savings if you have not already risked your own. Consider their Financial Security above your own
• Put it in writing:
While the initial approaching of your parents for financing should under all circumstances be done face to face. Ensure that you maintain your relationship with them by formalizing the loan in writing. While this might not be a formal legal document, it serves to clearly state what each party expects in this agreement
• Have a clear business plan in place:
It is always good to have clarity before asking for any kind of investment. Ensure you have a realistic business plan and a clear idea of when you expect to return the funds before even asking for it
• Prepare a Presentation:
Just because they are your parents, there is no need to treat them differently than you would any other investor. The best way to show them you are serious is to set up a meeting time, create a presentation of your business model and projected profits. Your parents need to have as much faith as you do before they lend you money.
• Understand their point of view:
As individuals of the previous generation, your parents have different concerns and values than you. They might not be ready to stake a large amount of money as much as they would like to support you. It is also important to consider where they are in their stage of life. If they are retired and living off a fixed income on their savings or have faced recent health issues, it may not be a good idea to approach them for funds
• Be Honest and Passionate:
Your parents probably know your strengths and weakness better than anyone on the planet. It is therefore essential that you do not share any untrue projections for your business. The key to borrowing money from them to fund your startup is to convince them of your dream and make them believe in your capabilities to pull your dream business off
Most importantly, it is of paramount consideration that you are confident. This does not mean that you bypass troubling issues that you think may deter them from their investment but rather that you are able to convince the two people in the world who have known you from birth that you are capable of making your business successful.
Be open to their inputs or criticisms but exude an air of confidence that makes them understand that you are fully focused on making your business a success and that the risk they are taking with their hard-earned funds is one that’ll pay off in the long run.