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It's All Relative

Turning to family or shareholders for a business loan? Watch out there could be taxes to pay.

This story appears in the May 1997 issue of Entrepreneur. Subscribe »

You've reached a crucial crossroad in your business. It's time to expand, but you lack the necessary capital to make it happen. You'd rather not apply for a bank loan, so what do you do? Keep your business in neutral until some new-found cash shifts your company into drive?

Perhaps you're considering tapping a flush shareholder or close relative. If you decide to take this route, do so cautiously. There are some important lending signposts to follow so you won't come up against an IRS roadblock.

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