How Do You Deal With Friends/Relatives You Borrowed Money For Business
How Do You Deal With Friends/Relatives You Borrowed Money For Business
It is true that if someone lend you money, they’ll want it back but how do you deal with a situation that is now so complex when friends/relatives don’t want to refund your money after a successful launch of their business. This bring about the topic: “How do you deal with friends/relatives you borrowed money for business?’’
Years back after I finished my secondary school 2008, I was opportune to work with a company who was into ice-cream making, to which I gained employment there because my friend was at that time an old staff working there for some years. To cut the story short, when I earned my first salary he requested he need some amount from me, as borrowed money to solved some issue. Being the fact we were friends, and I’m not one who leave friends in the lurch, I agreed to loan him the money and I felt it would be bad to declined his request. So, I gave him 50% from my salary, hoping by the next end of month he will refund me. Come the following month, I was hoping I will get my money immediately his salary was paid. But that became the beginning of some funny attitude I noticed my friend had with money.
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For example, he would dine at restaurants rather than food centers which are more budget-friendly. He would regularly buy new things for himself and others. Normally what someone does in their own time is none of my business, but in this case he had been repeatedly deferring his repayment to me, with the reason being that he didn’t have enough money. He would say that he would return on Date A and then not follow up; and then he would commit to a different Date B and not follow up again. Each time I had to follow up myself but get a delayed response, which would always be negative, in that he would say that he couldn’t pay up.
At that time I didn’t understand how one could have the money to make such extravagant expenditures (in relative terms—I personally don’t eat at restaurants because they are just costlier, and I rarely ever buy things for myself) but not have money to repay me. Personally, if I were to owe someone money, I would make returning the money my top-most priority, even scrimping, saving, and eating bread for my main meals. That’s because when someone loans money, I consider this an act of goodwill, and I would never want to betray this trust. As much as I hated to think this, it just felt like this friend wasn’t serious about returning the money at all.
After several attempts of trying to get my money back to no avail, I eventually gave up and considered this a sunk cost. From one excuse to another until I got tired of asking but had to let go and avoid further dispute between us.
How to Deal with Friends Borrowing Money
I share this to let you know that money matters can often change the dynamics of a relationship—friendships included. While I didn’t get my money back, I know people who have loaned money to others, close friends/relatives in fact, who never got the money thereafter. This actually remind me of a friend to my eldest sister who out of goodwill loaned out money for a church member for business, three years down the line, his business has become prosperous, but paying back became an issue even when police got involved in the case, is statement was: “I’ll pay when I have the money!” This pissed off the lady she had to sue him to court where he was put in prison till the case will be finally judge.
Here is a simple 3-step guide to deal with situations where friends (or people in general) ask to borrow money from you.
To Loan or Not To Loan?
If you have a friend asking to borrow money, whether you want to lend him/her the money depends on four factors:
1. Your relationship with the person : How important is this person to you? Are you guys close? How far are you willing to go for this friend/friendship?
2. Your values system: How important is helping someone in need to you? On the other hand, how important is the preservation of your finances? Which one is more important to you?
3. Risk of default: How reliable is this person? How likely will he/she return you all the money in a timely manner? How likely will he/she default on the payment?
4. Your need for the money : What if this friend doesn’t return you the money—will you be okay with that? Are you ready to lose this pot of money, or do you need it for personal emergencies?
If your answers for all four criteria are in favor of you loaning to him/her, then go ahead and loan the money. However, if one or more criteria isn’t fulfilled, you might want to consider if the importance of helping this person outweighs those factors. You should only proceed with the loan if you are okay with loaning, and not because you feel morally obligated to do so or because you feel it is the right thing to do.
How Much To Loan?
You don’t have to loan the full amount the person requests. It depends on your personal financial needs and your relationship with this person. Only loan the amount you feel comfortable with loaning. Never ever let someone guilt you into lending money or more money; it’s your choice on whether you want to lend and if yes, how much you want to lend.
Before (not after) you loan the money, get clarity on the repayment plan:
1. When will he/she be able to repay you?
2. How will he/she be repaying you? Bank transfer? Cash? Paypal?
3. Will he/she be paying in full or in installments?
However, it is not your place to judge them, because that’s the person’s choice and way of life. Your job is just to ensure he/she repays you according to the repayment plan. Lending him/her the money doesn’t automatically make you the boss of his/her life. In fact, trying to butt into how he/she lives his/her life is probably the surest way to make the relationship go downhill.
What If Someone Doesn’t Repay You In Time?
If the person doesn’t repay you duly, then confront him/her about the repayment and hold him/her accountable to what he/she borrowed. However, don’t drag his/her financial habits and personal expenditures into the picture. Give him/her a chance to sort things out on his/her own, in his/her space.
Focus on the situation (e.g., “It was agreed that you would repay X by Y date but you have not done so yet.”), not on him/her as a person (e.g., “How can you be so irresponsible with money matters?”)..
What If the Person “Ran” Away?
If the person scooted with your money, then… I’m sorry for your predicament. And seriously, shame on him/her. Don’t feel bad for lending the money to him/her, because you did it out of goodwill. It’s his/her folly and dishonor for running away with your money like that and betraying your trust in him/her.
Don’t let this bad experience scar your views on friendship and on loaning money though. There are still good people out there and there are people who genuinely need to borrow money for emergency reasons and will do whatever it takes to honor their repayment plan after receiving the money. One bag egg does not mean everything in the basket is bad.