A close family member has asked to loan money for a start-up?

SurreyBear

Reading some of these responses (and those on similar threads about start-ups) and the negativity about starting businesses is so depressing. Banks don't lend to start-ups and never really have in the way people suggest. Most startups rely on investment rather than loan. Having been to many entrepreneurship conferences the advice is pretty consistent - if you need money, remodel your plan until you don't; you can't ask people to invest if you yourself aren't willing. Yes, many businesses fail but even previously succesful businesses fail, it's not necessarily a reason not to do something. The advice to entrepreneurs is also to avoid investors because at some point they'll want influence.

The stakes the OP talks about are pretty high and yes of course s/he needs to consider whether they can afford to lose that money. But anything would need to be drawn up with a solicitor.

whitewing

My advice was to the OP to not lend the money in this particular circumstance.

It was not that the business shouldn't be set up.

Apples2

SurreyBear wrote: »

you can't ask people to invest if you yourself aren't willing.

That's the key phrase pertinent to most of the posts along these lines.

People simply aren't prepared to take ANY risk themselves but are looking to banks for the entire investment/risk.

Typically most seem to be from people already indebted up to their eyeballs, bad credit history, zero money but are genuinely puzzled why nobody will give them £20k to get their business idea off the ground.

dealer_wins

The only way I would put money into a business is if I had at least a 50% stake in it, trusted the other parties 100%, and believed in it 100%.

Xbigman

I agree with others, its usually a bad idea unless you're willing to lose the money without complaint.

That said we have no real information.

Is it a limited company you can take a stake in? Or a one man band?
How much is the other party putting in relative to your stake?
Is the money to buy physical stuff (IE assetts) or lease/fees (IE gone)?




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