5 Ways to Ask for Money...Without a Family Feud

Written by Allison Way on . Posted in Get Funding

So, you need a way to secure some capital. You've thought about turning to angel investors, but they're not for you. You've pondered about bootstrapping and digging deep into your own pockets, but that makes you nervous. Finally, you've landed on a pool of money that may be accessed with a bit of risk: your friends and family's money.

From 2007-2010 alone, 5% of US adults provided money to someone who was starting a business. It's a convenient and easy-going resource, but it can also have its downside. Here are five ways to ask friends and family for money without breaking up an important relationship:

1. Utilize small funds.
Asking your father-in-law, sister, uncle, or best friend for $10,000 may come to a shock for them. Instead, implement a strategy where you ask for smaller sums more frequently. Asking for smaller sums of money generates less pressure within the relationship. Try asking more than one person to support you so that you can ask for smaller amounts of money from a broader range of people. This could be safer than putting one relationship and a lot of money out on the line.

2. Choose a specific investment type.
Right off the bat, decide whether you are going to accept and pay back loans, have your friends and family own an equity stake or offer up a token of thanks (free access to your product or service?). Just because your friends and family are getting involved, doesn't mean they will allow you to walk all over them. They may be looking for an opportunity as well.

3. Give a light pitch.
Your friends and family probably do not want to see a 50-page business plan, but they will want to know what your business is all about! Give your friends and family a light pitch or give them a list of bullet points that covers all of your goals, strategies, target audience, and more. Keep your friends and family in the know—especially if they're lending!

4. Be professional when it comes to business.
If you're not talking about business, feel free to act goofy. But as soon as business is being discussed with your friends or family, it is time to act professionally. All documents and communications must remain business-like when friends and family are funding your dream. Make things formal. This will prove your professionalism and create trust between you and your friendly funders.

5. Manage expectations.
Your friends and family will be expecting big things from you, but they will be more patient than angel investors or venture capitalists. Keep your friends and family in the know as much as possible by sending emails and scheduling meetings.

Raising capital isn't easy...but it can be simplified when you're funded by friends and family. Use these five tips when asking for money from your loved ones and you will be well on your way to raising capital!