Who Can You Trust to Loan Money To?

True Story:

Glynn was a nice guy who was given $500,000 by his mother to buy a business, since his photography business went into the toilet. The money was burning a hole in Glynn’s pocket.

One evening Glynn met Joe at a local networking group. They started spending time together and became casual friends. Joe told Glynn he was an entrepreneur who owned different successful business in town. At least that is what he said.

One day, Joe told Glynn that he was opening a taco restaurant with two experienced restaurant partners. The business needed a taco machine with cost $10,000 and Joe was tight on cash. He asked Glynn to make a loan, secured by the taco machine. He would pay 10% interest-only payments for one year.

Time to hire someone to do Due Diligence

Two months later, the restaurant had still not open, and Glynn was not receiving payments. That was understandable, except that every time Glynn called Joe to ask about the payments, he never got an answer and he was brushed aside. Joe said “don’t worry, everything was all right” followed by rushing off the phone to catch a plane, run to a meeting, or solve a problem. No real explanation about what the real problem was or when Glynn could expect a payment.

Thankfully, Glynn got into touch with me, and hired me to help with evaluating one of the pizza businesses that he was looking at. While we were evaluating that business, he also told me about the advice Joe had given him regarding buying a pizza parlor. I found that the advice Joe was giving Glynn regarding this business was the exact opposite of my advice. Glynn agreed my advice made more sense.

This made me very curious. Then Glynn told me about his frustration with Joe. After hearing about how Joe always brushed him off, it became clear to me that something was wrong with this relationship.

I have been through this hundreds of time. The response I gave Glynn was “When someone tells you not to worry instead of giving you information that will satisfy your concern.—Worry.” I told Glynn to get the answers to his concern by talking to anyone and everyone he had to, even if Joe told him not to; Actually, especially if Joe had told him not to talk to that person.

So, Glynn contact the two partners in the Mexican Restaurant. He also read his loan documents and found that they were incomplete, even though the transaction was handled through an escrow.

I became more evident that the deal was not as safe as it first appeared. Joe kept getting more and more angry with Glynn for researching what was happening with the business, until he told Glynn, “This is not how friends act.”

Joe had that right.

Finally a payment arrived with a note reminding Glynn that this note was written for a year and only the payment was due, and not to ask for the principal until then.

Glynn thought of Joe as a close personal friend even though they had not known each other very long. Joe was being a salesman who was out to make a sale, not a friend who would have no ulterior motive. Friends are people you have known for 10 + years and never asked you to lend them money.

What is the rule? “Neither a borrower or a lender be.” It’s a timeless adage for a reason. It’s true. Loans kill friendships. If you really feel a powerful urge to hand over money, give the money as a gift and never expect it back. You will live a happier life for it.

If you have a similar story please write in and share with our buyers and sellers.

Creative Commons Attribution: Permission is granted to repost this article in its entirety with credit to Business Buying Services and a clickable link back to this page.

 

Image credit:   ATIC12 iStock

 

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