Guide to Lending Money

It's also important to include interest rates or other incentives to make the investment worthwhile -- maybe even a section about receiving a percentage of the business's profits. Kyle Campos and his brother are offering their friends and family up to 9% interest. "We wanted to give them something better than putting their [investment] in the money market," says Campos.

Finally, invest only what you can afford to lose. When Rohl gave $5,000 to the Campos brothers a few years back, he was a bachelor and held a well-paying software job. "If I didn't see the money come back it wouldn't have been devastating," he says "In my mind, that money's gone." Rohl views his now-monthly $86 deposit via CircleLending as an added bonus.

However, circumstances are now different for the 32-year-old. Rohl has since married and become a stay-at-home dad to his nine-month-old son. Giving away five grand now is not an option. "As much as I'd like to make that same decision [now], it wouldn't be financially feasible," Rohl admits.

All Things Considered

With about 100,000 businesses in the U.S. failing each year, according to Score, stay realistic.

If there's any concern that the relationship will suffer if the deal falls through the cracks, investing in the business is not advised. Keep in mind, too, that if the investment goes bad, you may be able to write it off as a capital-gains loss (check with your accountant).

And some advice for those who decide not to lend money but don't want to seem cheap or unsupportive? "Just say your spouse said no," advises financial planner and attorney Gary Schatsky. Or say TheStreet.com did.

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