Several posts ago, I described the difference between an investor/investment and a lender/loan. In various other posts and in my book Mastering Inventions & Patents; Markets & Money, I have pointed out the significant burden of regulations surrounding solicitation of investments. These burdens apply whether you are accepting money from a complete stranger or from a family member. If the investor is not accredited, then the legal costs of preparing the proper documentation that you are required to give the investor can be very substantial, easily $10,000 or more.
Therefore, if you seek relatively small amounts of capital, especially less than $50,000, it may not make sense to spend the money required to get set up to take investments. Instead it may be much wiser to take a loan. Loans are not subject to any of the regulatory burdens and are far simpler to set up. I do recommend that you have an attorney review any loan documents that you prepare, but the cost will be far less that the cost to prepare investment documentation.
