In today’s lending atmosphere, many entrepreneurs and small business owners must resort to family and friends as a source of loans to get them started or keep them going. Here are some things to keep in mind if you’re contemplating this route:

Money impacts all relationships. Make sure the one who lends you the money won’t be put in a financial hardship because as a result. Always think “what if I can’t pay him back?” Not that anyone is willing to lose money, but if you can’t pay back and put your friend in financial hardship – they will not be your friend for long.

This is a business relationship and you should treat it as such. “Don’t have an attitude that implies, ‘These are my friends and family. They will understand if I miss or delay a monthly payment, or fail to provide timely financial information or fail to communicate financial issues,” writes Jeffrey Yount, a partner at B2B CFO, in an article on AOL Small Business. At the same time, he says, don’t let them interfere with the day to day operations. They provided finances, they are not co-owners.

When the loan amount is great, you might have to enlist an accountant. If the loan is over $10,000, the lender is required by law to charge interest. The IRS issues monthly minimum interest rates that must be charged. Uncle Sam want s to know what is going on, so you better hire a professional to make sure everything is done by the book.

Put everything in writing. That is where it all starts. Put down in writing all the terms of the loan, the involvement of the investor in the business, and the collateral you are putting against the loan, if any. Even if the loan amount is not great, it will make your ‘investors’ feel protected.

Don’t make false promises that you know you won’t be able to keep. The suggestion is to under-promise and over-deliver. Make realistic calculations and pad them a bit to cover unexpected delays in delivery or payment.

Image thanks to http://www.flickr.com/photos/10944535@N08/2230236391/