Advantages of Lending to a General Partnership
If you are thinking about lending some money to a friend, family member or colleague to fund their general partnership business, you may be wondering if this is a good idea. The majority of your decision lies in the type of business that is being run, how it is being run and whether the business' ideas are solid regardless of whether or not it is a partnership. But here are a few suggestions for why it may be more advantageous to lend to a general partnership as opposed to other business structures.
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Paid on Time
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Since there are two or more business owners, you have an increased chance of being paid on time since they are equally responsible and concerned about the debt.
Checks and Balances
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General partnerships tend to have more checks and balances; no one owner can act without the other's approval. So a general partnership's owners are more likely to be decisive and prompt in answering concerns about their loans and other business affairs.
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Co-Signer
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Because there are two owners, you can easily get a co-signer on the loan if one owner's credit is unsatisfactory.
Personal Guarantee
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As opposed to a corporation, the owners of this type of business are personally responsible for the debt, so there is a higher likelihood of collection if the business goes bankrupt. With a partnership, the lender can go after personal assets.
Potential
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Because partnerships involve a meeting of the minds, with each owner bringing a unique perspective to the table, the business is more likely to succeed compared to a sole proprietorship, which operates on one opinion and one business mind. So the debt is more likely to be repaid.
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