Dos and Don'ts of Asking For Money

Do ask for referrals. The quickest and most effective way to expand your circle is to get the names of three referrals when as you're having a discussion with one. Getting the names of others you can ask can be just as valuable as a loan.

Do let the lender pick the final amount. Instead of guessing that your grandmother could lend you $8,000, put her on your list for $5,000 - $10,000. Then let her nail down the exact dollar figure. Many lenders like to finalize the amount of the loan themselves.

Do be sensitive to family issues. If the loan is between family members, be sensitive that it might raise some emotional issues for other family members, such as jealousy. The best approach is to be open about the loan as appropriate, and make sure the same opportunity—possibly even at the same terms—is available to other family members.

Don't change the way you behave when you ask for money. Be yourself. This even includes dressing like yourself: Showing up in a suit for a restaurant lunch with your mother will probably make her anxious (unless that's normally how you visit with her).

Don't ask for it all from one person. Unless you are fairly confident that a particular person wants to make you a loan, don't put all your eggs in one basket. Have a list of others who you're ready to ask.

Don't choose a lender out of desperation. Although you need the money, don't take it from people you don't trust or like. One entrepreneur says, "I avoid people who only seem interested in the money part, and not in what it takes to grow the business, people who say they can't wait to tell 'their people' about the deal, or people who are pushy. It's a gut feeling ..."