Family & Relatives

Are you looking to provide funds for a new business being setup by your Family Members?

Family and relatives are a very convenient source of funding tapped by budding entrepreneurs. This group includes the immediate family members, as well as distant relatives who have a good financial standing.

Their investments can help kick-start a new business by fulfilling the initial capital requirement. Investments by family and relatives can take any form – a share in the equity of the business, loans with or without interest, or even an outright gift. While investing, family members generally do not analyze the business idea, or the risk and returns offered by it. They have an inherent liking for the budding entrepreneur and want to see him succeed in life. Their investment is completely based on trust and personal confidence, and not on any objective research of the business idea. As a result, the risk associated with the investment is higher and not always commensurate to the returns offered.

There is no organized way of lending to family and relatives, rather it is very adhoc and often without any signed agreement. As an individual, if a family member has generated savings, he may have an innate desire to be involved in a business. And if one of his family members is starting a business, he will be very much inclined to make an investment in the same. This desire is even more profound, if the investor is a salaried employee.

This is the easiest and most approachable source of funding that new entrepreneurs can tap. They neither have to provide any solid business plan and market research to back the business idea, nor is the time period involved in receiving the money too long. They get quick access to cash, based on their personal relationship. However, the downside is that it can severely impact their personal relationship in case the business fails or some kind of conflict arises as a result of the investment.

Challenges

  • Lack of research of the business idea, or the expertise to do the same
  • Difficulty in understanding the current state of affairs of the business, and no well-defined way of recovering the loan or encashing the investment
  • If small amounts are collected from a number of family members, it can lead to a number of investors. This can in-turn lead to internal friction and fragmented decision making

Solutions

  • Providing access to proper research and analysis of the business idea, and the risks associated with it
  • Defining the holding period and planning the exit strategy from the investment
  • Loan management services to track and ensure that all repayment terms are fulfilled
  • Providing regular updates on the financial position of the business, and its future growth prospects

Benefits

  • Professional risk-return analysis and other financial analysis helps create confidence in the investment
  • Loan management services ensure that the warm and cordial relationship between you and the entrepreneur is not impacted
  • Our team ensures all the activities in setting-up and expanding the business are successfully completed by providing the necessary professional services

Sign up as a Family Member or Relative providing investments and learn more about the services available to ensure safety of your investments.