Business financing | Light on love money

Entrepreneurs have always asked family and friends to finance their SME project. This is called the love money or “patient capital”. What are the rules to follow and what pitfalls should be avoided with this type of financing? A specialist and an entrepreneur help us see things more clearly.

Posted on February 15

Stephane Champagne

Stephane Champagne
special collaboration

What does the love money for you ?

“It’s a mode of financing in which there is an emotional or friendly bond. I would say the stage of love money comes just before that of angel investors,” says Geneviève Tanguay, CEO of Anges Québec.

“We have to distinguish between the pure love money, which comes from the family and for which people very often have no expectations, and the smart love money, which comes from friends or employees” and which can involve expectations, explains Samer Saab, an electrical engineer who founded the Quebec company Explorance 20 years ago. “In the beginning, he continues, my brother and my uncle gave me money without expecting anything in return. Besides, my uncle had forgotten that he had contributed to my business. When I reminded him, his initial bet had been multiplied by 30! »

What do you need to know before lending money to your daughter, nephew, or even your best friend from high school who wants to start a business?


” With some love money, we engage in something often embryonic where we cannot do due diligence. You have to be ready to lose your money,” explains Geneviève Tanguay, CEO of Anges Québec.

“You have to be ready to lose your money,” launches Geneviève Tanguay, of Anges Québec, a group of angel investors in innovative sectors. ” With some love money, we engage in something often embryonic where we cannot do due diligence. You have to understand that this is for the long term. And you have to make an intuitive assessment. In my opinion, a good entrepreneur is better than a good idea. »

“It’s a bet, it’s a sum of money that people must be ready to lose”, also immediately supports Samer Saab, whose company specializes in the implementation of listening tools, survey and evaluation. “The risk of failure is high,” adds the one who has more than 1,000 customers in Australia, the United States, India, Jordan and elsewhere.

If the money means too much to the person who lends it to me, I’m going to lack audacity, I’m going to restrain myself as an entrepreneur by saying to myself: “it’s the money of a person I love”. I therefore preferred to give shares of the company in exchange for the love money that I received.

Samer Saab, CEO of Explorance

How should an entrepreneur manage this very particular financing?

“Above all, you have to clarify expectations,” says Geneviève Tanguay. Some will offer love money without conditions, while others will require follow-ups. Difficult things need to be discussed, much like a couple should discuss divorce before getting married. There must be signed agreements. Then, the minimum is to give a report every three months in its relationship with investors. It reassures and it creates a bond of trust. »

“As soon as we receive love money, you have to take responsibility and think about growth and profitability,” explains Samer Saab. “In 18 years, he adds, I have never needed external funding. I started my business by investing $55,000 out of my own pocket. In the first two years, I raised $150,000 from love money and it helped me a lot.

“From the start, I paid a lawyer to prepare a shareholders’ agreement. When my employees agreed to be paid in shares, again, we filled out legal paperwork. My first 20 or 25 employees that I paid with shares could already retire, if they wanted to. »

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