Funding your startup business from friends and family

Look to friends and family for help with your new business startup.

No matter how well you work stakeholder financing, most new businesses still need more cash, and your best source of the green stuff is friends and family. Parents, siblings and other relatives are obviously more motivated to help you out than a disinterested banker. The interest rates and terms attached to money from family and friends are also much better than institutional sources will offer.

Andrew Zacharakis advises drawing up loan documents to make the arrangements official, and he also suggests the debt be convertible into equity if the business achieves certain sales levels or other milestones.

"Often, it's based on getting a larger external financing round," he says. "Once you've got a product, you can go to angels." Other early financing sources may be co-founders and early employees. Says Zacharakis, "If they're as excited as you are, you should tap into their personal finances just as you have tapped your own."

On to Getting funding from suppliers for your startup business...