Whether you're starting up a new business, moving to another city, putting the kids through college, or paying off your maxed out credit cards, the time may come when you need to borrow some much-needed money. Lots of folks take the bank loan route, but not everyone qualifies, interest rates can be exorbitant, or another roadblock can make this path difficult or impossible to take.

That's why borrowing funds from family or friends becomes a feasible solution for those in need of financial aid. But before you take that route, consider the pros and cons of borrowing from those close to you. It's a blessing for a loved one to offer or agree to help you out, but there's more that goes into the transaction than a smile and a handshake. Weigh these plusses and minuses to assess whether or not borrowing from a friend or family member is the best choice for your financial needs.

PROS:

Flexible Repayment

When you're dealing with a personal friend or family member, things aren't as rigid as they might be when working with a bank for financial loans. Someone close to you may not even take your financial history or past debt into consideration. They may give you a longer time to repay the loan or allow you to pay back sporadically, when you've got the money to do so.

Intuit QuickBooks notes, "Young entrepreneurs and those with poor credit may struggle to secure a loan through traditional means. According to a recent university study, just 39% of small businesses managed to secure funding through a bank, with the most common causes of rejection being insufficient debt load, cash flow and collateral. A benefit of borrowing from loved ones is that you don't have to jump through the same financial hurdles to be approved. Because they are eager to help you achieve your goals, friends and relatives will often lend to you in cases where banks would not."

So if you need flexibility, borrowing from friends or family can really help you get off the ground or out of a hole. Unlike a bank, they may give you a grace period where you needn't pay them back for months until you can do so with confidence and without the fear of falling back into debt. But don't forget, as Chron encourages, "No matter what terms you work out, it is important to put them in writing. All parties must understand, and agree to, the terms of the loan and the repayment arrangement before signing the loan paperwork."

Lower Interest Rates

Another perk of borrowing from friends or family is the ability for them to allow you to pay them back with much lower interest rates than the bank might. At the end of your borrowing period, this will have saved you lots of money that you can put to better use than giving it to a bank.

If you are embarking on a startup business, a bank may charge high interest rates, as per Intuit Quick Books. "Because of the inherent uncertainty of small businesses and startups, banks tend to charge higher interest rates on loans for newer businesses than for more established companies. One of the benefits of borrowing from friends and family is that you can typically land a lower rate. Not only does this reduce your overall debt level—helping to boost long-term credit for your business—but it also enables you to invest more of your hard-earned cash back into the company. Investing money back into your business will help you grow faster and ultimately pay off loans quicker."

Even though the rates may be better thanks to family or friends, Chron still warns to get the terms laid out in writing and agreed upon by both parties. "Of course it is important for all business loans, even those financed by family members, to be properly structured. The startup money you receive should be structured as a loan, with a written loan agreement, monthly payment terms and interest rate clearly spelled out. This will help you avoid disputes in the future and protect your interests in the event there are problems down the road."

They Believe in You

While it may seem hokey, one reason borrowing from loved ones can be ideal is because they care about you, want to see you succeed, and trust you. While a banker may agree to lend money, they don't have that same level of investment in your well-being – in fact, the very opposite could be true.

As Small Biz Daily says, "No one believes in you like your friends and family do. Assuming you have a good relationship with your family members, they're naturally inclined to lend you money—after all, you're family! Friends and family members are motivated to help you financially because they want to see you succeed, unlike outside lenders and investors who are motivated solely by their own financial gain."

Prove to your loved ones that you're reliable and this will be a successful financial agreement. Don't take their generosity for granted and treat them with the same respect you'd treat a financial institution, and the interaction will be smooth.

CONS:

Tax Issues

While the lender may have the best intentions for you, make sure they don't get hit with tax problems because of poor documentation or preparation. According to Intuit Quick Books, "In their eagerness to help a friend or loved one in need, lenders may neglect to consider the effect a loan will have on their tax liability. Not only does insufficient loan documentation open the involved parties up to IRS scrutiny, but it may also lead to a contribution being categorized as a gift instead of a loan."

To prevent any issues, have a promissory note and detailed and signed documentation along with an agreed upon repayment plan. Intuit Quick Books suggests to take the same steps a bank or credit union would when setting up the loan, and you'll be clear of any tax violations or liabilities.

Can Affect Relationship

Money issues have been known to break families apart and put strains on friendships. What if you cannot pay back on time or need even more money than you initially thought? How will you separate the financial side of the relationship from the personal? Can you? Think about things not going swimmingly and talk about that openly before making a loan arrangement with a loved one.

Aabaco Small Business makes the point, "While your family supports you in your business endeavor, they might not truly understand the risks they would be taking if you were unable to pay off the loan they give you. If your business fails and you are unable to pay the loan, you may put your family member in his own financial crisis. This can put a serious strain on your relationship. Is it worth the risk?"

If you and the person lending are aware and OK with the potential twists and turns and bumps in the road that may come, but still believe you can manage the financial arrangement, go for it. Just be sure your faith in the strength of the personal relationship will make it through the hurdles.

Lack of Clarity

A big problem that can come from borrowing from a friend or family member is a lack of a clear-cut arrangement that can become something that over time is misconstrued or forgotten. As per Chron, keep things as formal as possible. "Many people treat loans from family members as informal transactions, but that is a big mistake and can be a big disadvantage of borrowing money from family members. The best way to avoid this problem is to document the loan as thoroughly as you would if the money was coming from the bank. Ask your business attorney to draw up the loan paperwork, detailing the amount borrowed, the interest rate and the required payment terms. Have your family member read the document carefully and take it to his attorney as well."

Just because you have a personal relationship, it doesn't mean the financial aspect should be as easy breezy. It's OK for the lender to have questions, stipulations, and barriers as long as you both work through them and come to a clear and formal arrangement in the end.

A friend or family member can be a lifesaver for you when you're in need of money. Weigh these pros and cons before making any major financial plans and you'll know whether it's best to go with a loved one or seek out a bank. Friends and funds can work harmoniously, but only if you think it through and take things as seriously as you would with a bank.

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Over two years into the most momentous event in our lives the world has changed forever … Some of us have PTSD from being locked up at home, some are living like everything’s going to end tomorrow, and the rest of us are merely trying to get by. When the pandemic hit we entered a perpetual state of vulnerability, but now we’re supposed to return to normal and just get on with our lives.

What does that mean? Packed bars, concerts, and grocery shopping without a mask feel totally strange. We got used to having more rules over our everyday life, considering if we really had to go out or keeping Zooming from our living rooms in threadbare pajama bottoms.

The work-from-home culture changed it all. Initially, companies were skeptical about letting employees work remotely, automatically assuming work output would fall and so would the quality. To the contrary, since March of 2020 productivity has risen by 47%, which says it all. Employees can work from home and still deliver results.

There are a number of reasons why everyone loves the work from home culture. We gained hours weekly that were wasted on public transport, people saved a ton of money, and could work from anywhere in the world. Then there were the obvious reasons like wearing sweats or loungewear all week long and having your pets close by. Come on, whose cat hasn’t done a tap dance on your keyboard in the middle of that All Hands Call!

Working from home grants the freedom to decorate your ‘office’ any way you want. But then people needed a change of environment. Companies began requesting their employees' RTO, thus generating the Hybrid Work Model — a blend of in-person and virtual work arrangements. Prior to 2020, about 20% of employees worked from home, but in the midst of the pandemic, it exploded to around 70%.

Although the number of people working from home increased and people enjoyed their flexibility, politicians started calling for a harder RTW policy. President Joe Biden urges us with, “It’s time for Americans to get back to work and fill our great downtowns again.”

While Boris Johnson said, “Mother Nature does not like working from home.'' It wasn’t surprising that politicians wanted people back at their desks due to the financial impact of working from the office. According to a report in the BBC, US workers spent between $2,000 - $5,000 each year on transport to work before the pandemic.

That’s where the problem lies. The majority of us stopped planning for public transport, takeaway coffee, and fresh work-appropriate outfits. We must reconsider these things now, and our wallets are paying

the price. Gas costs are at an all-time high, making public transport increase their fees; food and clothes are all on a steep incline. A simple iced latte from Dunkin’ went from $3.70 to $3.99 (which doesn’t seem like much but 2-3 coffees a day with the extra flavors and shots add up to a lot), while sandwiches soared by 14% and salads by 11%.

This contributes to the pressure employees feel about heading into the office. Remote work may have begun as a safety measure, but it’s now a savings measure for employees around the world.

Bloomberg are offering its US staff a $75 daily commuting stipend that they can spend however they want. And other companies are doing the best they can. This still lends credence to ‘the great resignation.’ Initially starting with the retail, food service, and hospitality sectors which were hard hit during the pandemic, it has since spread to other industries. By September 2021, the US Bureau of Labor Statistics reported 4.4 million resignations.

That’s where the most critical question lies…work from home, work from the office or stick to this new hybrid world culture?

Borris Johnson thinks, “We need to get back into the habit of getting into the office.” Because his experience of working from home “is you spend an awful lot of time making another cup of coffee and then, you know, getting up, walking very slowly to the fridge, hacking off a small piece of cheese, then walking very slowly back to your laptop and then forgetting what it was you’re doing.”

While New York City Mayor Eric Adams says you “can't stay home in your pajamas all day."

In the end, does it really matter where we work if efficiency and productivity are great? We’ve proven that companies can trust us to achieve the same results — or better! — and on time with this hybrid model. Employees can be more flexible, which boosts satisfaction, improves both productivity and retention, and improves diversity in the workplace because corporations can hire through the US and indeed all over the world.

We’ve seen companies make this work in many ways, through virtual lunches, breakout rooms, paint and prosecco parties, and — the most popular — trivia nights.

As much as we strive for normalcy, the last two years cannot simply be erased. So instead of wiping out this era, it's time to embrace the change and find the right world culture for you.

What would get you into the office? Free lunch? A gym membership? Permission to hang out with your dog? Some employers are trying just that.

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Did you hear about the Great Resignation? It isn’t over. Just over two years of pandemic living, many offices are finally returning to full-time or hybrid experiences. This is causing employees to totally reconsider their positions.

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