Financing from friends and family

Introduction

It's common for owners of small and start-up businesses to look to relatives and friends for support when they need additional business funding.

This can work well, but often these arrangements are informal and based purely on trust and verbal assurances.

This guide explains the benefits of borrowing and investment from friends and family and how to avoid misunderstandings by setting up a formal finance deal that is legally binding. It also outlines the tax implications of loans for you and the lender.

Subjects covered in this guide

• Introduction
• Loan or investment?
• Benefits and pitfalls of friends and family finance
• Setting up a loan or investment with friends or family
• Legal agreements
• Tax and finance from friends and family

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