Borrow money from family or friends
- KVK Editors
- How to
- 15 April 2019
- Edited 27 October 2025
- 2 min
- Managing and growing
- Finance
It is nice if your family or friends want to invest in your idea or business. When you make good agreements, such an 'informal' or private loan can be a big help. There are also downsides to borrowing money from family and friends. So prepare well. What should you pay attention to when taking out a private loan?
What is a private loan?
Borrowing money from family or friends is also called a private loan. Such a loan comes about without the involvement of a bank or other lender.
Arrangements for a private loan
Arrangements about the private loan are set out in an agreement (contract). You can draw up this agreement together. In the agreement, you must in any case state:
- the borrower and lender
- the loan amount
- the interest rate (or other compensation)
- the duration of the loan
- how you receive the loan. For example, by bank transfer
- how the loan will be repaid. For example, monthly or all at once
 You can also make agreements about:Â
- what happens if the loan is not repaid
- cancellation of the loan
- early repayment
- what securities are given to the lender
- if you can use other types of credit during the loan period
What should you agree about interest payments?
By agreeing a market-based interest rate upfront, you avoid problems. You determine the level of the loan interest rate (in Dutch) based on the financial market at the time. An interest rate is reasonable if it is the same as the interest rate of a commercial lender. For example, the interest rate a bank charges for a similar loan.
What is a subordinated loan?
You can subordinate a loan to other creditors. This often happens with a loan from family and friends. That loan then becomes a subordinated loan. You will then only repay it when 1 or more other lenders have been repaid. This means the amount of the subordinated loan is available longer than other loans.
Equity capital
Consider the solvency ratio calculation. This is the number that indicates what percentage of your balance sheet total is equity capital. The loan amount is counted as if it were equity capital. This improves your equity capital and therefore your solvency. This gives confidence to other financiers, which may help you if you approach them for financing.
When is a private loan interesting?
A loan from family or friends is interesting in several situations. For example, if you are starting your business. Then a bank or other financier may not want to give you a loan because you do not yet have figures for your business. Family can help you with start-up capital if they believe in your plans.
A private loan can also be useful if you want to bridge a short period when you have less money. For example, if you are waiting for a larger loan from a bank or financier, or for a subsidy to be awarded. Then you can get ahead with the money from a private loan. A loan from family or friends can also be part of stacked financing. This is when you combine different forms of financing.
Think carefully about a private loan
With an informal loan, you borrow from someone with whom you have a personal connection. This is why it is important to think carefully about whether you really want to do this. It can cause problems if, for example, you cannot repay the loan for a few months in a row. Consider beforehand whether your relationship can withstand this.
Help with business financing
KVK’s Financing Guide helps you find your way in financing your business. Do you still have questions? Call the helpline on 088 585 11 11 or ask an expert.
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