OPINION: FINANCING WITH THE HELP OF FAMILY WILL HURT YOU

You want to start your venture. You’ve suddenly gotten inspired, and have been thinking through the idea for a few months now. You have a workable product model and are ready to push through and hit the market. You even know who will help you with the manufacturing and can get good prices. Your buddy is a marketing guru and will handle this side of things. 

But you need capital

For you to start and keep going for a few months, you will need more capital than what you currently have saved for yourself. Besides, you don’t want all your savings to go down to the startup. You are ready to make a sacrifice, but you don’t want to run dry.

So, what now?

Are you supposed to go to the bank and explain your innovative startup idea to some people who most likely won’t understand the vision? “No, this is out of the question” - you think to yourself as you shake your head. 

You shouldn’t be that determined to say no. 

The truth of the matter is - you will be better off going the bank/ angel investor route than financially backing your startup on your own or asking for monetary help from your family. There are a few reasons why you should do this: 

1. When you found a company, you can apply for the credit as such: You have limited liability. If you end up being in debt, the company will have to pay the bank back, and not your personal. If you get in deep, you hold limited liability (if you found an LTD.) 
2. No personal ties: If you have family that you count on, it might be both a blessing and a curse. With a bank loan, you owe money to the bank. With a personal loan, you owe money to the people who have raised you or have been with you most of their lives. You jeopardize the relationship you have with them and your capability of recovery if it all goes down the drain. 
3. Loan history: If (when) you pay the initial credit off, you will be allowed to take bigger, and potentially more stable financial loans from the bank. This way, you can grow your business exponentially, only keeping in mind inflation and your contract conditions. 
4. Personal conditions change: Things happen to us humans. Whether you are suddenly struck by bad luck, or, the opposite - a very good one, you need money for it. Are you expecting? Well, your account will be too. You broke your leg as you were skiing and now need some thousands to fix yourself? Guess what that would take. You will need your personal money, and you might need your close ones to help with that, rather than startup financing 
5. Escrow: No specific entity has the funds. Not your cofounder, not you, not your family. It’s the bank. And having money away for you to access that is away from you can be a good thing, especially for those of us who don’t have the best money-saving habits and reach out for their cards too often.

What do you think? Would you take money from your family for your startup finances? Comment below!