You’ve got a great business idea but need money to get it. One way to raise capital is to ask your friends and family members to invest in your business. But how do you go about asking people you know for money?
Here are a few tips:
Make a formal pitch.
You wouldn’t go into a meeting with potential investors without preparing a formal presentation, so don’t do the same when asking friends and family for money. Have a well-thought-out business plan that outlines your business idea, your financial needs, and how you plan to use the funds. Keep in mind that a pitch is a must for you to secure funds from any source, be it a shark investor, a member of your family, or someone from your friend circle. So, be prepared! If need be, check out these pitch deck examples to make it compelling enough to persuade your friends or family.
Explain why you’re the best person to lead the business.
Your friends and family members want to know that you’re the best person to lead the business to success. Explain why you’re passionate about the business and what makes you uniquely qualified to lead it in your pitch.
Offer equity in the business.
If you’re asking for a significant amount of money, you may want to offer equity in the business in exchange for the investment. This will give your friends and family a financial stake in the business’s success.
Be prepared to answer tough questions.
Your friends and family members will have questions about your business idea and your plans for using their money. Be prepared to answer questions about your business model, competition, and financial projections.
Offer a repayment plan.
Suppose you’re asking for a loan, include a repayment plan in your pitch. This will show that you’re serious about repaying the money and have a solid plan.
Be honest about the risks.
No business is without risk, so be honest about the risks associated with your business. Your friends and family members need to know they could lose their investment, but also emphasize the potential rewards if the business succeeds.
Say thank you.
Whether or not your friends and family decide to invest in your business, thank them for their time and consideration.
Asking friends and family members to finance your business can be tough. But if you go into it with a well-thought-out plan and a sincere appreciation for their support, you’ll give yourself the best chance for success.
What to say when asking for money
When it comes to asking for money, you can do a few things to make the process go more smoothly. First, it’s essential to be clear about why you need the money and what you’ll use it for. For instance, if you own a restaurant, you might need additions to the dining area such as displays or signage (which can be sourced from companies such as LoopTV or others like them) to entertain people with music videos or give out digital menus that can help them to order. You can explain the necessity of such investments for your business to the person you would ask for financial help. Be prepared to answer any questions the person you’re asking may have. It’s also a good idea to have a specific amount in mind that you need, rather than just asking for “a little bit of money.” Finally, be grateful for any money you receive and be sure to pay it back if you can.
If your business did not progress as per your plan, it’s better to do something to repay the amount. Because it is vital to keep the trust of your friend who provided you with financial help when you needed it the most. Perhaps you should start thinking about ways in which you can repay them. One of the things you can do is, sell your assets like land, or house and get instant cash to repay the debts. There are many real estate companies like Crawford Home Buyers (https://webuyhousesinatlanta.com/woodstock/) that can provide hassle-free settlement for your property in a short period. So, yes, it is essential to have a backup plan to manage a financial crisis.
How much to ask for?
When starting a new business, thinking about how to finance your venture is an essential first step. This may seem like a no-brainer, but if you have bad credit and a low credit score, you may not qualify for a loan from a bank. The good news is that many people with good credit have friends or family who may be willing to lend them money to start a business. Well, you can ask for the same money you want to borrow but don’t beg for more; accept what they can lend you. Make a budget plan, think about how much you’ll be spending on office space rent, sturdy furniture from Office Monster (officemonster.co.uk/office-furniture) or similar websites, hiring reliable employees, digital infrastructure costs, etc. When you have an estimate, you’ll know how to approach your family and friends to ask for the amount.
How to thank people who contribute
Asking friends, family members, and acquaintances for a loan is often not an easy thing to do. But if you have a solid plan for running your business, you know the money is not only needed but is critical to its success. Once you’ve done the legwork to create your business plan, it’s your turn to get the word out.
What happens if someone says no
At some point, you have to ask friends and family for financial help. The last thing you want to do is ask them for a loan or ask them to invest in your business. However, if you do not ask, you will certainly get no. Asking favors from loved ones can be tough, but knowing how to address the subject will be the difference between getting the money and not. If someone says no, accept it!