Interest free loan - wording?

littlerock

I am planning to lend my sister a small lump sum for a business venture of hers. To be honest I would give the money to her with no strings, but she wants me to make it a loan so she has a vested interest in repaying it. So I have said it can be interest free and not repayable until the business can afford it (Year 3 of business plan if all goes well.)

I will not be holding her to it anything goes wrong but she is a detail sort of person and feels happier with something in writing between us.
Anyone know where I can find a suitable proforma?

Arleen

All points to "not make it a loan", so don't make it one. Give her a gift, make it clear that it's a gift and say so on transfer title. Because that is what you've described, so why bother complicating a simple matter.

pollyanna24

Or, if you are really not that bothered about getting the money back, just write it in a form that you are both happy with, but that is not necessarily legally binding.

BrassicWoman

or, ask for 5/10% of the business - if it does well, you both do well; if it doesn't, well, you made a bad investment, no hard feelings

ViolaLass

She wants to have a 'vested interest' in repaying? Why can't she just repay it, if that's what she wants to do?

Gambler101

I will agree with the idea of making it a gift, and like the idea of owning say 10% of the business. (Just in case it goes on to be worth millions you never know)

littlerock

My sister is keen to repay me when she starts making money and wanted an agreement. So I said it should be interest free. Why is this such an issue with everyone.

Arleen

littlerock wrote: »

My sister is keen to repay me when she starts making money and wanted an agreement. So I said it should be interest free. Why is this such an issue with everyone.

Because what you descibed in OP is compliating something extremely simple, and potentially putting your family relation at risk. While giving out a gift, and her giving you gifts in the future if she feels like it, doesn't, as it removes the axe from over her head called "But I promised him money!".

Business fail, even the ones who are well prepared, thought out, ran by experienced people and deeply financed. It's how it is.

System

Most start ups fail in the first 2 years and lots of them had great business plans that predicted in year X it'd make a fortune but like most business plans they didn't survive first contact with real trading. If you're not prepared to chase her for the money if it doesn't go to plan you might as well just make it a gift as others have said.