Asking family for money is one of the oldest forms of business finance in New Zealand, and one of the most fraught. It can be fast, cheap and patient. It can also turn every family gathering into a board meeting. If you’d rather keep the two apart, there are good alternatives.
Why owners look for an alternative
- The relationship. Nobody wants the business’s bad quarter to become a family problem.
- Fairness among siblings. Money lent to one child can feel like a gift withheld from others.
- Their security. Parents approaching retirement may not be able to afford a loss.
- Independence. Some owners simply want to stand on their own feet.
The alternatives
Property-secured business loan
If you own property with equity, even with a mortgage already on it, a property-secured loan from $20,000 to $1m may be available as a first or second mortgage. No financials or tax returns are needed for the initial assessment. See second-mortgage business funding.
Unsecured loan or line of credit
For businesses trading 6+ months, a loan sized on turnover and bank statements. Weaker credit is considered. See unsecured alternative lending.
Asset finance
If the money is for equipment or a vehicle, let the asset secure it. See asset finance explained.
Outside equity
For higher-growth ventures, angel investors or crowdfunding may suit better than family money. See alternatives to equity investors, which also covers when equity is the better call.
How family can help without handing over cash
- Security support. A family member may offer their property as security for a commercial loan. It keeps cash in their account but puts their property at risk, so it needs the same care as lending cash, plus independent legal advice.
- A reference or introduction. Sometimes the most valuable help is a connection to a customer, supplier or adviser.
- Skills. A retired accountant parent reviewing your cash flow forecast is worth a lot.
If you do borrow from family, do it properly
business.govt.nz is blunt about it: put it in writing. A sensible family loan agreement covers:
- Amount and purpose.
- Repayments: amounts, dates and what happens if one is missed.
- Interest, if any, and how it’s paid.
- Security, if any, and whether it’s registered.
- What happens if the business is sold, fails or you want to repay early.
- Whether it’s a loan or a gift, especially for estate planning.
Each side should get independent legal advice. Your accountant should advise on tax treatment.
Comparing the options
| Family loan | Commercial loan | |
|---|---|---|
| Speed | Fast if they agree | Days |
| Cost | Often low | Priced on your situation |
| Flexibility | High | Set by the agreement |
| Relationship risk | Real | None |
| Paperwork | Should be formal, often isn’t | Always formal |
How we help
We arrange property-secured business loans from $20,000 to $1m and unsecured loans and lines of credit for businesses usually trading 6+ months. A 60-second enquiry, no credit score impact, and a lending specialist calls to talk through whether a commercial loan could take the pressure off family.