At some point, your business will need some cash. Whether you need startup funds or had a rough quarter in sales, sometimes your bank account cannot take the hit. One option to get help is to turn to a friend. Many people hesitate to ask friends because they do not want to ruin the relationship, however, there are ways to make the process a smooth one.
You will need to find someone with the financial means to help you out. Do a mental survey of your friends and family and see who might be willing to help you out with some money.
You do not want to damage your relationship so make sure you are asking someone who feels comfortable saying no to you. Make it clear that there will not be any hard feelings.
Honesty is the best policy if your peer is willing to lend you money. It could take some time to pay back this loan so be honest about your progress until everything is paid off. Also, be willing to share your financials and business plan with your potential lender too.
Your loan is riskier to the lender if you ask for too little. To make this a successful transaction borrow enough money to solve your problem, otherwise it is not worth it.
Come up with clear terms to pay back the loan. Whether you plan to pay it back in installments or in one or two lump sums, there should be a plan in place. Try coming up with “best-case” and “worst-case” scenarios with plans for each. Set deadlines to make it fair for you to and your lender, and to make yourself accountable.
Some might not want anything except to be paid in full, some might want interest, or a stake in your business. Make sure that you discuss what is in it for your lender before you take any money. If you are borrowing money for over a year you might want to consider offering to pay interest.
If you want to have a lawyer write up legal papers, go ahead. Type up a letter that explains the loan the terms. This informal write-up services as a reminder of terms than anything else. Discuss what is best for your situation with your friend or family member.
Say thank you and appreciate the gesture. Once the loan is pad off, consider doing something nice for your lender.
Many investors are drawn to P2P lending because of the promise of high returns, but few investors take the extra time to discover how they can maximize these returns. If you implement these five keys it is highly likely that you will become a successful P2P investor with above average returns.