Lend money to an enemy, and thou will gain him, to a friend and thou will lose him – Benjamin Franklin
Business deals with family and friends most times do not go as planned. This is why most people tend to shy away from any business that relates to a family member or a friend. If a family member or a friend is asking you for a loan and you feel like you’re about to be guilt-tripped into giving it, take the following tips before loaning money to family or friends.
This is money we’re talking about; your money nonetheless. You need to find out where it’s going and the chances of it being recovered. If it’s not for a lucrative deal, the possibilities of getting it back are very slim. The person in question might not be totally honest with you; sugar-coating it so it sounds more appealing than it really is. Ask for time to decide then use that time to investigate some more. There’s bound to be another family member or friend, who knows the entire truth and is willing to come clean somehow.
Say no if you have to
There are no sentiments in business. If after weighing the pros and cons, you still do not see reasons for asking for a loan or your gut is telling you not to give them the loan, don’t be too scared to let them know. State clearly, why you won’t be able to give them the loan and leave no room for them to try and convince you.
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Weigh your financial strength
Just because they are family or friends, you might be tempted to give even beyond what your account can carry. Be sure to weigh your own financial strength before granting anyone a loan or you might be the one in need of a loan soon. The best advice I’ve ever received on money and loans is to ‘never loan what you cannot forfeit’.
Ask for interest
The best way to ensure that family or friends understand that it’s a loan and not an act of charity is to make it as business-like as possible. Ask for interest on your money and don’t be sorry about it. The words ‘wicked’ and ‘selfish’ will be muttered a couple of times but if you’re good at business you should be used to hearing those words. Don’t let them get to you.
You should get collateral if need be
You may not go as far as asking for collateral but sound the duration of the loan clear as day. Also, inform them of possible consequences should they fail to pay at the due time. This is no time to mince words else they won’t take you seriously. Don’t cross your legs and wait it out either, when the time is drawing near make sure to constantly remind them.
Doing business with family and friends sure is a tricky business that’s why you ought to tread cautiously. You may rather offer a bit of the money they are asking for willingly, as a gift than loan them money and constantly worry whether they’ll pay or not.