This information is based on experience and common sense rather than any specific common or statute law.
Money lenders have never been popular. The problem is that they always want their money back. If you want to keep a friend you should remember the old adage “neither a borrower nor a lender is”. Unfortunately most businesses need to borrow money at some time. Where you look to borrow depends on how much money you need, what you need it for, and what security you can give. There is not sufficient space here to advise on all the possible sources of venture capital, but here are a few general points.
Pointers about borrowing money
Be certain you need to borrow! Look first at government grant schemes. If you are setting out with a new business, look also at the Prince’s Trust.
The simplest and easiest first borrowing is from friends and family. Do not expect support, even from close relatives, simply because they have money. The entrepreneurial spirit may be less strong in them than it is in you.
Treat friends and relatives from whom you borrow as you would treat a bank or lending institution. Pay interest, no matter how little. Prepare business plans, and offer to talk the plan over with them. Try to help them understand what you are trying to achieve, your resources, and timing.
Make pessimistic assumptions - particularly as to timing. Very many small businesses fail not because the idea or execution is bad, but because they run out of money before they have really got off the ground. Whatever your true estimates, halve them before presentation to any borrower. If this means that you then have to ask for twice as much money, so be it. If your estimates are wrong, then you will be still there, working and laughing. If you fail in this then you will be tarred with the brush of failure, as well as have the ignominy of repaying the debts some other way.
Security Issues
Your bank will always want security. If your business is ongoing, with a regular and substantial cash flow, then they may look to that for their security. Otherwise they will seek specific chargeable assets, such as your house, shares, or business property. Despite the fact that the banks lend billions to third world countries with no hope of repayment, their requirement for security from you is not unreasonable.
They expect to make a profit through the interest differential, and simply cannot build in the proposition that a quarter of their customers fail to repay. If you nominate your house or any other asset as security, be sure that others involved know the risks of doing so and do not just say 'yes' because they trust you.
Not enough money? - go back to work and save it. Sell your house and buy a caravan, or go back round the relatives. Do not start up your business until the money is in place.
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Do not provide a complete or authoritative statement of the law;
Do not constitute legal advice by Net Lawman;
Do not create a contractual relationship;
Do not form part of any other advice, whether paid or free.
