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Coming up with the money to start a new business is a challenge, but it is not impossible. There are many options, some of which you may not have even considered. In addition to traditional lenders, you can seek money from friends and relatives, look for lenders through the SBA, or even borrow against your retirement accounts.
Friends and family
Borrowing money from friends and relatives makes many people uncomfortable, but it’s a sacrifice some are willing to make to start their new businesses. If you have people willing to help you, approach them as you would any potential investor. Present a professional loan request with supporting materials such as a business plan and earnings projections, just as you would to a commercial lender. If you go forward with a loan from a friend or family member, draft a contract that outlines the terms and conditions of the loan and the obligations of both parties.
Borrowing from yourself
If you have a 401(k) plan, you may be able to borrow against the money you have been contributing. About 90% of 401(k) plans allow loans. If your plan allows you to borrow against it, you can get a maximum of $50,000 but not more than 50% of the total amount in your account.
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