After bank finance, borrowing from family and friends is the chief source of funds for new business start-ups in many countries, including the UK. Yet there has been virtually no treatment of this issue in the literature to date. We rectify this omission by developing a model of lending behaviour in which family members may have selfish or altruistic motives. We identify the key determinants of family lending using a unique data on Asian entrepreneurs in Britain.
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Basu et al. (2001) studied this question.
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