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Money Choice: I took a loan from my parents to start a venture with a friend

·4-min read
Express online shopping. One day delivery service. Group of parcels. Online shopping makes life easier. Unboxing online purchase.
(PHOTO: Getty Creative)

By Chelsea Ong

SINGAPORE — To many, mixing friends and family with business is a deal breaker. Sarah*, 19, a student, decided to take a chance and venture into a business with her friend turned business partner using money she borrowed from her parents.

Here’s her story.

“I was actually approached by a friend to be his business partner in a company selling sustainable products. At that time, it had been about a year since I had founded my online jewellery brand and was looking to start a wholesale business.

It was a good timing for both of us, and I believed in his business idea of selling eco-friendly products since more people are looking for alternative options to live a sustainable lifestyle. Furthermore, if I rejected his partnership proposal and went on to start my own wholesale business, the amount of money, capital and effort I would need to invest would be way higher. Hence, I decided to take a leap of faith and became a co-founder of the company.

Although splitting the initial cost with my partner did lower the amount of investment on my end, it still did require quite a large amount, especially to a student like myself. Since we are in the wholesale business, there is quite a high risk involved. I invested a total of about S$7000, of which I borrowed about S$2000 from my parents. My parents are very supportive of my business ventures because their mindset is that I’m young and have nothing to lose. So when I shared my friend’s proposition with them, they were very willing to lend me the money.

My parents didn’t explicitly say that I have to pay them back, but I do plan on doing so. If this business does well, I’ll use my profits to do that. If not, I’ll use my time before university to work and pay them back.

If my parents had not lend me the money, I would’ve just invested a smaller sum in the business, and hold less shares in the company. I don’t feel much added pressure because of my parents’ involvement, because I can always find a job and pay them back. Rather, I feel an added sense of responsibility because I’m in a partnership with someone else. This requires me to remain accountable and meet both our expectations, all while balancing schoolwork and my own jewellery business.

We currently use an overseas manufacturer for our goods, whom my partner sourced for, so most of our money has gone towards our goods. But a large part of it has also gone towards hidden costs such as rental of shelves in bigger retailer stores.

We’ve also encountered some unforeseen circumstances, for example cashflow issues because of credit terms. Orders have also slowed on the pre-order form on Instagram for customers, but that could also be due to a lack of marketing on our side. We plan to start on paid online advertisements and have just started selling our products with a big name retailer, so hopefully all goes well and we can get our high-risk high-return reward.

Another risk I’ve taken is the opportunity cost of investing my time and effort into this business. I have less time for my friends, myself and for my studies. My new semester has not even started yet, but I can already tell I’m going to struggle to balance work and studies once school starts.

However, I think my toughest challenge so far has been managing my stress levels, which have been the highest they’ve ever been. A part of this can be attributed to miscommunication issues with my partner, which led to conflict at the start regarding issues like differing expectations and workstyles. Hence, I think it’s very important to be open and frequently update each other on what’s going on.

Perhaps one thing I regret is worrying unnecessarily about things such as my competitor’s sales — something which I have no control over. However, on the whole, I do think it’s been worth the while simply because of how much I’ve learnt. Even if I don’t do as well as I expected, I’m glad that I learnt so many new skills. I would not be the person I am today if I hadn’t started my businesses.

If you’re keen on starting a business, I would say 'just go for it'. Take calculated risks while you’re still young and explore what’s out there. If all else fails, you can always go back to the corporate world. But for now, do what you enjoy and are passionate about.”

*Name has been changed as the interviewee prefers to remain anonymous.

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