You just joined a startup and you're considering early exercising your stock options, or maybe you're a founder who wants to buy a house or bootstrap your own business, but you don’t have enough cash. Borrowing from a bank may be challenging or expensive due to the lack of liquid assets you have available to borrow against. The good news is that credit is cheap right now and the borrowing options for holders of private stock are more available than ever. Learn about the options you have to achieve liquidity.
Intrafamily loans can be a useful tool for achieving liquidity and life goals like exercising options, buying a home, investing, or paying off debt. Intrafamily loans are not considered gifts since the recipient of the loan must pay interest (at least equal to the applicable federal rate). However, since these rates are lower than what a bank would usually offer and family members are more likely to lend a higher amount, intrafamily loans can still be very attractive. You’ll want to carefully consider the tax implications and your own family dynamics before pursuing this option.