FAMILY, FRIENDS AND FOOLS
The acronym FFF stands for Family, Friends and Fools, i.e. Family, Friends and People close to the entrepreneur. They are, on many occasions, the first resource of the small entrepreneur who wants to make a breakthrough.
ADVANTAGES OF FFF FINANCING:
- There are no repayment deadlines or interest. Those closest to the entrepreneur are not looking for an economic benefit with their contribution, so they will not ask for interest or rigid deadlines for the repayment of the money. An "oxygen balloon" that will come in handy for the new project. In fact, family members usually provide non-refundable backing.
- Easy to convince. The entrepreneur does not need, in principle, much effort to convince family and friends to invest in his project. The emotional bond helps.
- Entrepreneur retains full independence. To develop it to their liking (at least, until they seek new financial or logistical support in the form of business incubators).
DISADVANTAGES OF FFF FINANCING:
- Money breaks friendships. It is an established fact that many friendships, and even families, have broken up because of financial disagreements. If the entrepreneur does not meet his obligations to family and friends within the stipulated period, the first frictions may begin to emerge. In this case, it is better that the entrepreneur, when asking for money, operates with realistic prospects and does not promise impossible loan repayments.
- The amounts to be lent are usually small. With this form of financing, it is unusual to be able to borrow large sums of money. The entrepreneur may find it easier to borrow from family and friends, but it will be for a smaller amount than if he/she had resorted to professional specialised institutions.
- Bad business decisions. Fools may be impulsive and easy to convince to invest in your business but, by the same token, they may also believe they have the right to make decisions in your business. As non-experts, they can become an obstacle that interferes with the overall project.
Just behind the entrepreneurs are friends, family, and people close to the circle of the founders. This investment will contribute to making the equity model more credible. This money should be used to finance the development of the product and to create a prototype that can be validated in the market.
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