Financing from friends and family

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. However any confusion about the agreement could damage personal relationships, so it is important that both parties are clear about what any investment will involve. See advantages and disadvantages of raising finance from friends and family.

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.