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I have two questions for you (borrowing from family)

Discussion in 'General Entrepreneur Discussion' started by Andreas Thrane, Feb 25, 2019.

  1. Andreas Thrane
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    Andreas Thrane Contributor I've Read UNSCRIPTED FASTLANE INSIDER

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    I used the search function to find threads already covered these questions but can't find any. Delete this post if it’s already been discussed. Sorry in advance.

    Family funds
    To get my business started I need some funds. There are several ways to get the money, but the fastest and cheapest is to lend it from my brother. However I’m in doubt about how to go about this the best way possible. Have you ever borrowed money from your family members to fund a business? What are your key take-aways? Should we formulate a contract beforehand?

    The money will cover the price of machines for a service business.

    Your experience with testing the market before investing?
    I have a business idea. It’s not innovative but the service I will offer isn’t available in my geographical area. I know the business is viable other places.

    What I tried so far:

    - Leased the machines for a week to test the interest. (It’s not possible, because they strictly sell the machine)

    - SEMrushed other businesses

    - Pitching the business council in my geographical area

    How can I minimize the risk factors even more?


    Sorry if this is not relevant. Let me know, if you need more information. English are not my mother tongue and I hope it won’t cause misunderstandings.
     
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  2. Thoelt53
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    Thoelt53 Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    How much money are we talking about?

    If things go bad and you're left with depreciated machines, and still in debt to your brother even after selling the machines, how will this impact your relationship with him?
     
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  3. Ernie McCracken
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    Ernie McCracken New Contributor

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    Do you have at least a rudimentary business plan? Is this a debt or equity deal? Both?

    Treat your family the same as you would any potential investor, imo.
     
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  4. minivanman
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    Borrowing money is never a great idea but borrowing it from a family member would be the WORST!!! So, what is the amount you need? I ask this because I have a follow up for it.
     
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  5. NMdad
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    First, do NOT borrow money from family or friends. It can poison the relationship.

    Second, get clients BEFORE you spend money on any machines. Have them pay you a deposit before you start any work, and use the deposit to rent the machines. Or, use the entire client fee to pay for the machine--in other words, the client pays you for the service, and you buy the machine; in this case, you would essentially do the service for "free" but you would own the machine.

    Find out who else might have the machines, and ask to rent them. See if you can find any used machines for a discount. There might be people/businesses who own the machines but don't always use them, and you could offer to rent the machines while they aren't using them (like outside of regular business hours, or for 1 day or 1 weekend at a time).

    If you have paying clients and renting is NOT an option, it would be better to NOT pay the full price of the machine right away; see if you can arrange payments to purchase them.
     
  6. rwhyan
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    rwhyan Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    How can you offer people your service using the least amount of capital and in the fastest time possivle? Not your full service but a bare-bones version to gauge interest.

    The only way to know if people will buy is to ask them to buy.
     
  7. Ernie McCracken
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    Ernie McCracken New Contributor

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    Don't agree with this. Of course it's a huge risk with lots of horror stories out there, but what do you think wealthy families do? They borrow/lend seed money from each other all the time, which is a HUGE advantage over the rest of us who have to start from nothing. Under-capitalization is what kills most businesses before they ever get off the ground.

    I personally know of multiple entrepreneurs who were only able to start with investment from family. One woman nets $200k-$300k/year profit distributing pull tabs for the past 10 years. She was broke and unemployed when her grandpa gave her $50k to start. Another woman I know borrowed money from her folks to start a chain of dance studios. I know a guy who owns a car dealership that was purchased using his dad's money. Also know a guy who owns a 7 figure agriculture operation - financed through family.
     
  8. minivanman
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    One woman nets $100k/$200k..... 2000 people borrowed money from their family and now they are enemies. Agree or not, it's the truth.... 1 vs 2000.

    Now about your theory..... what do I think wealthy families do? Well, I know several and none have done what you say they do. I'm not saying there aren't any but you act like every wealthy family does that while it's probably very rare. Every family that has over $1 million (usually way more) that I know has made their kids/family members work for it. Let's take a famous Nascar driver that I know. His brother wanted to be a racer like him. He did not fund his brothers racing career. He helped his brother a little bit with a mini stock ($3500 total cost). Then I introduced the Nascar driver to some friends because he wanted to play on some local dirt tracks. That connection lead to his brother racing a super late model. He still never gave his brother any money. Now let's take an example closer to home.... me and my grandson.... we have all laid out a plan for him and it does not include any free money from us. If he strays from the plan, that is his choice. I will always be here for guidance but not money. He wants to own a chain of garages..... could we fund this in the beginning? Sure we could.... will we? Not a 1% chance. You see, once you are at the top of the ladder, you see things much different than someone who is looking up the ladder. Now on another note..... GIVING money to someone is a whole other topic but we are not talking about GIVING.... the OP is talking about BORROWING. I GAVE my sister $2,000 but I wouldn't have ever LOANED it to her.
     
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  9. The Abundant Man
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    The Abundant Man Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    "Borrowing from brother"

    Time to go no contact

    [​IMG]
     
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  10. Andreas Thrane
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    About 3000$ plus 1500$ that i add myself.

    Yes i have a business plan. Actually it's his own idea to borrow me the money, after he asked me about it. I always thought its a bad idea to borrow money from the family, but he got me thinking. We talked about an equity deal where he gets 10%.

    Do you have any experience borrowing money from family members?
    I need about 3000$.


    Thanks for the ideas. I have a meeting next week with 3 agriculture owners who is potential customers.
    I just browsed some used machines (why didnt i think of that myself?!), and there are some for sale. I have to consider, that there are no warranty? Oh well.


    Thanks for taking your time to set a new perspective on borrowing money from the family. A few of my friends got money from their parents to start their business, but i think its different from borrowing money from your brother.

    In short: I'm in doubt about what to do.
     
  11. Andreas Thrane
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    Andreas Thrane Contributor I've Read UNSCRIPTED FASTLANE INSIDER

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    Call me stupid, but i dont get it :D
     
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  12. Longinus
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    As soon as my sister heard my business was taking off, she also offered me to borrow money. I don't want to because:

    - If it boosts my business, I owe her. (even if I pay it back).
    - If I fail, I owe her (because I can't pay it back).

    Both outcomes to be avoided.

    Find another way. The "borrow money"-way seems the easiest, but will be the hardest.
     
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  13. minivanman
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    minivanman Platinum Contributor Speedway Pass

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    So we are having this conversation over $3000? Come on, if you are serious, you can get a 2nd or 3rd or 4th job and save that much in just a few short months.

    I'll warn you that if you are trying to do this with the very least money possible, just know that you will probably need more money. Something is going to come up, so keep the 2nd/3rd/4th job for a little while to make sure you have the funds needed.

    You need to have more jobs before next Monday.
     
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  14. MJ DeMarco
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    This is about $3,000?

    And here I thought we were talking about $50G or something.

    Have to agree, if you can't save $3G in a job, there might other considerations here...
     
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  15. Andreas Thrane
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    Andreas Thrane Contributor I've Read UNSCRIPTED FASTLANE INSIDER

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    @MJ DeMarco @minivanman - Appreciate the help guys!

    There seems to be a misunderstanding. It's not like i can't get the money i need by myself, and i've never asked my brother about the money. We had a family dinner, and i was asked about my plans. My brother liked the idea, and got fired up about it and offered me the rest of the money i need. Before that it was never an option for me.
    I work two jobs already. It just got me thinking, cause the faster i get off ground with the business the better. Because of your guys input, i won't take my brothers offer. This is MY project. '

    I hope I won’t look like a lazy a$$ for asking that question, because I’m not.

    Thanks man. I decided to do it without my brother.
     
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  16. MJ DeMarco
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    If you borrow from your brother I would suggest getting everything in writing, no different than if you borrowed from me, or your neighbor.

    Good luck!
     
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  17. Kak
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    Do you have a credit card?

    A word of caution... Micro businesses that only take $3000 to start are usually one of two things...

    1. Unscalable owner operator jobs.
    2. So unbelievably competitive, that you your likelihood of failure is higher than if you just went for something more legitimate.

    If you can see it falling in to one of those categories, maybe save yourself some time and scrap the whole thing.
     
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  18. Andreas Thrane
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    Andreas Thrane Contributor I've Read UNSCRIPTED FASTLANE INSIDER

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    Yes i have a credit card.

    Thanks for the caution. It's my first business, so the more help the merrier.

    First of all, i'm inspired of this.

    The service i will provide is mobile detailing, which is a tested and proven business model. In my geographical area no one is doing this. I made some research, and it's not competitive - i might be wrong cause i never made that kind of research before. My goal is to get B2B deals and my thoughts so far:
    - Theres a lot of golf courses in my area, and the golfcarts needs cleaning.
    - Tractors and other agriculture machines.
    - Trucks.
    - Companies with a fleetpark.
    - Workmen/Craftsmen are all using cars that needs cleaning.


    Is it scalable? Yes it is. It might not be 'easy' to expand and scale. I probably not going to be rich of THIS company, but it will provide with a cashcow that will allow me to invest in something else later on.
     
  19. Ernman
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    Detailing requires a lot of your time UNTIL you hire employees. Remember divesting your time from the biz is one of the critical components. You say you can scale. Please discuss how you plan to scale.
     
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  20. Timmy C
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    Starting mine with under $3000...... hate reading this sort of thing, makes me question my business.

    Done doubting myself all the time stuff that lol.

    I got this.
     
    Last edited: Mar 1, 2019
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  21. Andreas Thrane
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    It all comes down to sales in business. If I can sell subscriptions of various types of auto car detailing (B2B), then some sort of stable income is secured. This will allow me to plan ahead and eventually hiring. I will start hiring on hourly basis so that it remains flexible for me.


    A critical component is to systematize the service, so the customerexperience is close to identical.

    It’s definitely not the easiest business to scale, but I don’t think it’s impossible. If I find it too difficult to scale, then I treat it as a goodpaying job atleast, and then I will be able to invest in something else. For me, money is a tool towards freedom.
     
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  22. ZCP
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    Just like any loan / investment in your business, do they add anything besides the money? connections? workforce? assets? sales? don't just take money.

    if your brother is fired up about investing and you write up a simple loan agreement, use the $3k to get started. he volunteered it. offer him 10% return and go make 100% with it. be clear in the agreement he gets nothing if you fail. then don't fail.

    [this assumes $3k is pocket change for the brother and he is mentally lighting fire to it as he hands it to you..... if he is liquidating his 401k and giving you all the money he has in the world, do NOT do it]
     
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    Thank you for clarifying your plan for scale. Please keep us posted on your success.
     
  24. minivanman
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    I'm not sold on the golf cart idea because I'd figure they have their workers clean them every day.... no?

    My vote is for you to save up the money for what you need. Then go out and get some work BEFORE you buy ANYTHING!!! Now that you have the work, you have the money to buy what you need.

    But, speaking of golf carts..... in your country, where do the country clubs get their golf carts? Do they own them? Rent them?
     
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  25. Real Deal Denver
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    This is an extremely sad thread for me to read.

    I once had a fiance whose parents were multi-millionaires. She lost her job. I worked my a$$ off to pay the bills but ultimately couldn't do all of them. Almost drove me to kill myself trying to stay afloat.

    She wouldn't ask dear daddy for any money because, in her family, that's "just not done." So I get sucked down this whirlpool.

    Eventually, I ran out of money. Didn't even have ten dollars she needed one day to pay a kid to mow the lawn. What happened? She threw me out. Nice. This is after I gave 100% of what I had to give. Ever give 100% before? Try it.

    So I leave, dead broke, and depressed. She calls up her daddy because now there's no choice, and everything is fine and dandy.

    Put me into financial hell. I couldn't even afford FOOD. Drove me into bankruptcy.

    Don't know how I survived, actually. Screwed up my life for YEARS.

    So screw you tight bastards that have 6, 7, or 8 figure bank accounts that think you can take it with you.

    I'm a much better man for it today. I always thought her, or her daddy, would throw 20-30K my way to "reimburse" me for what I gave. He owned five oil wells "just for spending cash" so even 100K was nothing to him. What a stupid dream that was. Never happened. No surprise there.

    I know several people like that still today. Lots of money, but tight as hell. Although I am cordial to them, and they think everyone likes them - I actually despise them and can hardly stand to look at them.

    Am I bitter? Hell no. If I was your brother or even your friend, I'd sign the check for you. No written agreement - no terms - no tainting our friendship. If you never pay me back, fine. There is SO much more that's important in life that's above stinking money. That's why I gave all. I value PEOPLE over money.

    TAKE your brother's money. It can make your relationship stronger and closer. If I was your brother, I'd be honored to be ABLE to help you. Course, you have to hit bottom to appreciate that kind of POWER to be ABLE to do something like that. I would be PROUD to be able to help you. I'd also be super proud that you are taking on this venture! I'd be your number one fan! What else besides money can I do to help you? But, that's just me. Different.

    For the rest of you tightwads, have you checked your stock accounts today? Did you make an extra 3 F*cking percent today? Great!!!!!!!!!!!!!! You can have your money. We can only HOPE that you'll have even MORE tomorrow! I feel sorry for you. Really. You'll never the experience of having pure joy at being BLESSED enough to help someone else. Of course, unless you have your attorney draw up a CONTRACT on how you will be paid back, and have it notarized. And you'll be counting how many pennies that contract will be making you every day - oh, the pure joy of it all... bliss!

    My wife is from a different culture. She and her family thinks about HELPING somebody as I have explained here. Sad to say, but I respect them much more than my family, that keeps track of every little thing they have, and how they compare to their friends and neighbors all the time.

    I just had an argument with a close friend about this. I said that money can be replaced, but their character and who they are, and how they think, will be with them forever. Think that over - thank your brother for being such a great human being - and go make this happen!!!

    One more thing. Think like the people on Shark Tank. They bring a shark into their business so they can be more successful. Could you do that with your brother's help? Open the door for him. If I make a dollar for every dollar my brother makes, I'm fine with that. I'd much rather have both my brother and I each make a dollar than me make $1.25 all by myself. Two heads are better than one, and you have a trusted partner/co-worker - and a back up plan. Think big!
     
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