At Globe Live Media we tell you five things you should keep in mind to borrow money from your family and start a business in the US, something that is quite common within the Latino community in the country
Two of the central factors of the Latino population in the US are trust and familiarity. Two elements that have been called by various sociological researchers as part of the “social credit” that Hispanics have to compensate for the difficulties they face in obtaining various types of financing.
It is precisely social credit that has given rise to savings mechanisms as unique as tandas, and what has made many members of the Latino community go to their families to get money that they will use to start businesses or their own companies.
The data supports this statement: approximately 96% of Hispanic entrepreneurs, as well as employees in Hispanic companies, said they would offer financial support to their families if they needed it, according to surveys carried out by the company QuickBook Intuit.
Similarly, 83% of Latinos indicated that they would offer financial support to members of their community if needed.
But this does not mean that borrowing money from your family or community is without risk or consideration.
Therefore, at GlobeLiveMedia we explain five things you should keep in mind to borrow money from your family and start a business in the US.
1 . The terms of the loan with your family should be as clear as possible
Brittney Castro, a financial planner, recommends that any money loan made within the family be done in honest and clear terms.
“I always say that you should be very clear about what (the loan) is, how much it is going to be, what the payment schedule is going to be, if an interest rate is going to be charged or if it is going to be a loan. free of interest that you will repay in two or five years“Castro said during a Quickbook Intuit digital event to celebrate Hispanic Heritage Month.
2. The family lender must consider the money granted as a gift
Despite the clarity of the terms, family members lending money to their loved ones would do well to consider the borrowed money as a gift. In this way, there will be greater tolerance for risks and even the possibility of default.
“Only give (the money) if you agree not to take it back, because there’s a chance you won’t. You don’t want to harm family relationships because of this,” warns Castro.
3- Be honest about your ability to meet the loan
Like any loan, financing from the family nucleus requires responsibility and honesty about the ability to pay off the debt.
Likewise, she remembers that, although family loans do not carry other risks such as the possibility of affecting your credit score, this does not mean that your social and family responsibility is not affected.
4- Take only the money you need
Borrowing money from your family has advantages, such as the ability to maintain ideal cash flow for your business. However, it is recommended that you only take what is strictly necessary to avoid over-indebtedness and that you use the money efficiently (that is, start working for you, achieving a return on investment).
5- Do not delegate all responsibility for your money
Although it is correct to surround yourself with the best possible staff and the best advice you can afford, financial planner Brittney Castro recommends not completely disregarding the management of resources, in order to ensure that they are used in the best possible way.
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