Q:

How do you borrow money from private sources?

A:

Quick Answer

To borrow money from private lenders, borrowers should solicit or apply for loans from three primary groups best suited for such purposes, advises Bigger Pockets. The first group includes friends, family and close acquaintances. The second group is made up of business associates of the first group, and the third group is composed of accredited investors and others found through networking. These lenders are non-bank entities that commonly develop a closer relationship to lenders that banks do.

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Full Answer

Borrowers seek loans from friends, family and close acquaintances because these lenders know them best, and this makes obtaining the loans easier, according to Bigger Pockets. To prevent the souring of close relationships, however, borrowers should be clear with these lenders about the risks involved in the ventures for which the loans are sought. Although such loans are not often large, they can provide a borrower with a great source of start-up funds before seeking other funds from other sources.

Seeking loans from business and professional contacts of the first group allows borrowers to expand their financial circle with a larger pool of potential lenders and investors, explains Bigger Pockets. Because such lenders come from referrals of those in the primary group, they tend to be more receptive to projects for which the loans are sought. The greatest source of loan funds, however, comes from lenders and investors who specialize in such private loans and can be found through networking and research.

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