Family Lending: The Fear Factor on 02/16/2011

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Are you considering a loan agreement with a family member? If so, you’re probably facing the fear factor: “Family and money don’t mix.” Is it true? Well, consider this analogy.

You’ve heard the trumped up charges. Things like: “Four out of five new businesses fail within five years,” and “Only one in three start-ups survives.” Declarations like these strike fear into the hearts of would-be entrepreneurs and nip many a new business plan in the bud.

Yes, there are a lot of failures out there, but in truth, many new businesses have every chance of success. What separates the likely success stories from the imminent failures? Usually preparation. Those who get off to the right start—those with experience in the field, knowledge of the market, a well-researched business plan, and adequate funding or investment, for example—are those who are successful in the end.

Now back to that other trumped up charge: “Family and money don’t mix.” When it comes to lending to family members, yes, there are some horror stories out there. But, as with new businesses, getting off to the right start can ensure success.

If you’re considering a loan involving family, don’t let the fear factor govern your decisions. But don’t rush in unprepared, either. Do your research, then create a proper, legally recognized loan agreement (LoanBack makes it easy). This way, there will be no misunderstandings. It’s the best way to ensure you family loan ends as a success, not a frightening statistic.