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Loaning Money

Not long ago, a friend presented to me a business plan that seemed to have merit. He was quite excited about the potential return on investment and asked me if I would loan him the money so he could move forward and take advantage of the opportunity while it was available.

As much as I liked this guy and respected his business acumen, my immediate reply was, “I don’t loan money,” which was (and is) true. My quick response was from programming myself that “I” am not in the loan business - the bank is in the loan business. Therefore, my position was not in judgment of his business idea, but that my “I do not lend” answer would always be the same. To this day, I do not loan money.

Of course, this programming came from a loan that went south many years ago. A friend came to me and had an emergency need to borrow money. He said he would repay me in no more than five weeks so I lent him the cash. When the five weeks passed - and he had NOT repaid me - I called him and he said he needed a few more weeks because the real estate deal had not closed yet, but for me to “rest assured; they will shortly.”

After a few subsequent conversations and 8 weeks later, he filed for bankruptcy. Through his bankruptcy documents, I discovered he had borrowed a similar amount of money from a number of other friends!. To the best of my knowledge, all of us friends never were repaid; I DO know for sure, I was never repaid!

Note to self: stick with the business that I know and let the banks do what they know which, of course, includes lending money.

Nevertheless, there’s exception to most rules.

A few years after my ‘tough’ lesson in lending, my Executive Assistant found herself going through a messy divorce. She confided in me that she was in financial difficulty and had concerns about where she and her infant daughter would live, as she wasn’t getting any help from her soon to be ex-husband. I was very touched by her plight and wanted to do what I could to help out this much-valued employee. I knew I had vowed years prior to not loan anyone money, yet I had empathy for this wonderful person who was working and doing her best to provide for her young child.

This left me with only one option. Instead of loaning her the money, I inwardly treated it as a gift. Knowing her so well, she would have never accepted the money as a gift. So, I had to keep my ‘treating this as a gift’ to myself, so I let it be called a loan.

Of course, being the honest and upright person that she was (and is), she repaid the loan. When she did, I told her, “I really didn’t expect to be repaid, and, in fact, I had treated it as a gift!” To which she said, “Even though I appreciate the thought, I would never have accepted a gift like that! You were kind enough to let me have the money when I REALLY needed it, so it’s only right that I repay you! Not repaying you was never a question for me; I knew one day I would and now that I have, I feel great!” And with great relief in her eyes, “ I now feel SO good! It’s like a burden that I had placed on myself has been lifted.”

Her response gave me another reason to not lend money as it reminded me of Proverbs 22:7, “... the borrower is slave to the lender.” I love my family and friends too much to be a participant in having them feel that way. And although I had done a good deed for my assistant, truth was, she was burdened by my kindness.

Lending money can be such a quandary. I have my beliefs - JUST DON’T DO IT! And of course, one size does not fit all! But if you are contemplating lending money, here are a few tips to help you feel comfortable about your decision:

  • Determine how important it is to be repaid.

  • Think of the loan as a gift.

  • Discuss the loan openly with your friend or family member.

  • Don't be afraid to say “No.”

Just remember that lending money could cost you a friendship. Maybe the best way to help a friend is to make suggestions such as the name of a good banker, or a way to liquidate assets, or perhaps a way to live life a bit more frugally. By not loaning money, you could be doing both you and your friend the biggest favor of all - saving your valuable friendship!

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