Borrowing Business Startup Funds From Family/Friends

Before you go into business with family or friends, carefully consider the possible problems. Spend the money to pay for a good agreement, prepared by an attorney.

David Gass, founder and President of Business Credit Services, Inc., has this advice for those considering borrowing from family and friends:

Borrowing from family and friends can be good for some. However I have seen most business owners get into fights or trouble with borrowing money from someone close to them. If you are someone that lends money to a family member just assume you gave it away. You can’t expect to get it back. You are usually the last person they think of when paying bills because they believe you will wait. This causes stress on the relationship. I would recommend using a site like virginmoneyus.com to manage the paperwork of the loan if you want to borrow from family and friends.

Virginmoney (yes, this is a Richard Branson company) puts itself between the borrower and those family or friends who are the lenders. As I understand it, the borrower and lender(s) agree on terms, and Virginmoney puts together the documents and handles the paperwork and the payments. In other words, they create an "arms length" transaction so the loan is handled professionally and the two parties can keep their family/friend relationship separate. I'm sure there is a cost, but it sounds to me like it's worth it. What do you think?