Investing family finances into your business

Are you tired of relying on banks to help you out with loans when you know there are cheaper options? Do you have family money sitting in a savings account doing nothing? Situations like this can make it tempting to put your family money into your company. This is sometimes a good strategy but it also has the potential to go wrong. The key is to ensure you have a clear idea of what you’re doing, why you’re doing it, and how you can manage it – then you can invest with confidence.

The benefits of investing family finance

In general, family members support one another. This means that you won’t have to beg for other family members’ permission to use family money in your business, you’ll just have to make a good case for doing so, explaining how it will help and what you will do to ensure it isn’t all lost. If things do go wrong, you know you’ll get a sympathetic hearing. Because your family members know you well, they’ll be able to make much better judgments about your abilities than a bank manager who talks to you for just half an hour. They’ll let you know if they have any concerns and this can help you to fine tune your plans. They won’t charge you interest on the money but you may well be able to make it work for you in such a way that they all benefit.

Risks to be aware of

In some cases, using family money can put a strain on the relationships that are most important to you. There are two key ways of avoiding this. The first is to be honest about how much money you’re using and what it’s for, so that they can trust you and feel that they’ve given their full consent. The second is to keep them informed, admitting straight away if things are not going to plan. They may be able to help and they will feel reassured that you understand the money belongs to the whole family, not just to you.

Consulting a financial advisor

When you take a big step like this, you can improve your chance of success by consulting a professional financial advisor. Cleon Papadopoulos is an advisor who has worked in a series of high profile positions with the likes of Security Pacific Bank, UBS, Attica Bank and the TT Hellenic Postbank. Now based at London Alfa Limited, he works with businesses to help them invest in an effective way. His sound understanding of business strategy means that he can help not only with sourcing and positioning money, but also with making sure it really works for you.

Financing options

Family finance doesn’t just mean savings. It could also mean taking out a loan using family rather than business credit, using a family credit card to manage business debts (often the most economic option), or even remortgaging your home in order to fund a business acquisition or expansion. Your financial advisor can help you work out which option is best for you. Making a good decision about investment, with your family’s support, could give your business just the boost it needs and help to secure your family’s future.