When Friendly Lenders Become Unwanted Partners in Your Photography Business

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The oft-quoted proverb “Never mix friends and family with business” goes out the window the minute Aunt Alma offers to help you out. This can be a blessing or a curse. How do we influence which it turns out to be?

In a lot of ways, photography business is unique. In a lot of ways, it is like every other business. All businesses have expenses and start up costs. These startup costs include the money you’ll need until your clients and customers bring in enough to cover those costs. There is standing still money to keep business in operation during slow periods. All businesses need money. They need a steady stream of reliable funds, even before Day One of business life.

The grand plan is always that the business carries itself. In good periods, money is squirreled into a reserve, or emergency fund. But what happens when this isn’t possible, or even the reserves run dry?

Peoples’ plans for funding business are as unique as the person running the business.

There are three main ways to finance a business

  • Self funding
  • Borrowing
  • Investment

Each method has different sources of money and different implications for your business. It’s important to understand the difference and what those implications might be.

Self funding

For most small business, self-funding is the preferred way to cover money needs. The business is making enough to cover its expenses and provide income to its owners. If necessary – during startup, for instance – owners put their own money into the business. Savings and second incomes are examples of self-funding. The owner, or beneficial owners, in the case of married couples, doesn’t go outside their own resources.


Almost everyone understands what borrowing is. Cars, houses, and purchases made with credit cards usually involve borrowing. It may be called a loan, mortgage, or finance agreement, but all work the same basic way. A third party pays money on your behalf and you agree to pay that money back over a period of time, usually with interest. This can be a loan for cash or a specific item. The terms of repayment are structured and definite.


Money that comes into your business as an investment from a third party usually has a “wait and see” characteristic. The terms can be less structured than a loan. For instance, money might be tied to the performance of the business. If the business does well, the repayment for the investment might be higher. This is where we get the term “return on investment”. At the very least, the investor will want to be sure that their investment is safe. If the business fails, their investment might be lost.

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So your photography business needs money…

If your business needs money and you don’t have any, you’re going to need a third party’s money. The most common way a small business borrows is with a business credit card or line of credit. If you have a good relationship with your financial institution you may be able to secure a loan based on your personal credit worthiness.

Commercial lending for larger amounts might prove difficult if your business doesn’t meet the lender’s criteria. Photography in particular is a difficult business due to stiff competition and high failure rates.

Your only option may be friends and family.

The oft-quoted proverb “Never mix friends and family with business” goes out the window the minute Aunt Alma offers to help you out. This can be a blessing or a curse. How do we influence which it turns out to be?

Here’s how it all goes terribly wrong

The worst thing Aunt Alma can say as she hands over these friendly funds is “Pay me back when you can.” At that moment she might mean it. Though you believe her, your commitment to yourself is to pay her back as soon as possible. You don’t want to let her down. More importantly, you don’t want this hanging over your head. Still, the best of intentions aren’t enough to keep this from going bad.

Over the course of time, you might notice that Aunt Alma starts to take an interest in your business. Not only does she check in occasionally to see how you’re doing, she might even offer suggestions about how things could improve. Her attention seems to grow more focused over time. The day that her suggestions become instructions is the day you realize you’ve made a terrible mistake.

Instead of a lender, you have a not so silent partner.

Why do we let personal relationships screw up our business?

Whether it’s money, or services, or just about anything else to do with our business, personal relationships can create all sorts of problems. The reason is obvious. People in personal relationships don’t seem to hold one another to the same standard as everyone else. Things are casual, there is no mystery in personalities. Everyone knows one another. There’s another ignored proverb: “Familiarity breeds contempt.”

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Where money is concerned, the problem is the confusion over whether the situation is borrowing or investment. We consider it a loan. We will pay back the money and that will be the end of it. Aunt Alma grew to consider the money an investment.

One of the differences between borrowing and investment is that an investor could infer ownership, even if that ownership is only emotional. The money we pay back is based on the performance of the business. Likewise, if the business goes down the drain, that money goes with it. A loan, on the other hand, has structured terms and scheduled payments. If the business dies, the obligation does not. The lender’s only interest in the business is that it repays the obligation.

How do we avoid the awkward family picnic?

If the reason for these problems is obvious, that means the solution should be obvious, too. And it is. Friends and family should be treated with the same arms-length professionalism as anyone else.

The same way that friends and families should go through your client process when you’re providing services (see “How to Build a Portfolio Without Destroying a Friendship”), you should formalize your financial affairs with a written agreement. Be clear that the money is a loan. Decide how it will be repaid. Set a schedule and stick with it. Make it clear that no part of the funds goes toward an ownership interest in your business. You are the only one who has any say in how the business is run.

Even if the money is a gift, acknowledge this in writing. This protects you not only from an unforeseen change of heart, but from the interest of any future heirs.

Being a professional goes beyond what you do with a camera. It’s how you run your business. It’s how you approach situations and how you treat people.

Remember that people, especially friends and family, will only take your business seriously if you do. Very little in business is more serious than money.

Treat it that way.