10 Pitfalls of Starting a Family Business


Cosigning Loans with Relatives

If you're planning on cosigning a business loan with someone, make sure you understand what you're doing. First, you're not just vouching for someone when you cosign a loan. You're agreeing to pay in full if he defaults, and if he misses even a single payment, you're liable for the debt. Second, never forget that the person you're cosigning for is a real-live credit risk -- if he had good credit, he wouldn't need a cosigner. Also, if possible, make sure that whatever is being bought with the loan is at least partially under your name so that you have some recourse should things go south.

Finally, know that defaulting on that loan could be disastrous for your relationship with the cosigner. If you have a nagging voice in the back of your head telling you that it's a bad idea, listen to that voice.