Stage 1: Self & circle
Family & friends (the “FaMa bank”)
Quick answer
Money from parents, relatives and friends is often the first outside capital, and it is fast and flexible, but it can strain relationships if terms are not written down.
Best suited for
Founders who need a small amount quickly before they have records or collateral.
Pros
- Fast, flexible, often low paperwork
- Based on trust, not credit scores
- Can be structured as a loan or small equity stake
Cons
- Relationships can suffer if things go wrong
- Informal terms lead to misunderstandings
- Family investors may expect a say
Watch out for
Put it in writing: amount, loan or equity, repayment or exit, and what happens if the business fails.
Real-world examples
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Not sure which fits you?
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