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Family and friends are the next most common source of business funding. They’re a good source of finance to start with if you need a few thousand pounds to set up premises or buy stock. It’s always worth considering the worst case scenario, however: what happens if you can’t pay back the money? What would happen if they wanted their money back early? Do you want them getting involved in the day-to-day affairs of your business? The best course of action is to set up an investor agreement – a legally binding document outlining the amount of investment, the payment terms and any involvement the investor may have in the management of the company. As a minimum, have some form of written contract outlining what would happen in each case and what you are liable for. You don’t want your twenty-year friendship to break down as a result of borrowing money without clear expectations to begin with.