You are about to start a business that needs capital. You know a rich family/friend with some extra cash but you are not sure how to approach him/her or what to tell him/her. From all the stories you have heard; once people borrow money from family and friends the relationships deteriorates especially if the business fails or experiences a slow take off.

You have considered what it could be like if you ever failed to pay back the money on time. The thought of which leaves you sleepless at night. It would mean avoiding Christmas dinners, barbeque at Aunt Rosie's house and other family occasions. Yet your need for the capital remains and the conviction that your family and friend has the money still lingers.

You know what; it doesn't have to be that way.

The main problem is that relationships go sour because individuals set up wrong agreements with their family and friend and forget that relationships will suffer if certain obligations are not met. Actually as much as 8 out of 10 people do not have a written agreement with the family and friend they borrowed money from, but rely on inaccurate and flimsy conversation as the vehicle towards joining themselves into a business relationship.

However as time goes on details become very fussy, neither party can remember exactly what was said or the transaction details.

(It is common for start-up entrepreneurs to ignore family and friend as a source of raising capital solely based on their reluctance to ruin relationships. However the people that care about your success, most of the time are your family and friends. Also this sector of the community can offer the best source of start-up funding as we shall see later in this book.)Underneath all this problems is the root cause of non-disclosure. What people failed to tell the family and friends that has now become the cause for contention between both parties.