f13.net

I have known the guy since college.  I wouldn't say we are close as we don't regularly socialize together, but I see him a few times a year.  He has (or had, apparently) a good finance business.  He called me last night to ask for help "in the short term".  The amount of money he wanted to "tie him over for a few months" is greater than the US median annual income.  I could afford to help him technically but if he reneges on repayment then it would obviously hurt and my wife would be pissed.  I discussed with the wife and she said no way.  My Dad said don't do it.  Anyone I ask says don't do it.

He said that he added people to his business to grow it and then revenue actually shrunk and he has been too slow to trim staff.  He claims the losses suffered this year mean a tax refund 5-8x the amount he wants to borrow is coming.  He has a residence and vacation property which he says he has already tapped.  I suspect he needs cash more to sustain his lifestyle (3 kids in private school) than to support his business which is capital light - mostly rent and payroll.

I am not going to do it.  No one I trust thinks it is a good idea.

But I want to hear any stories from this group - 1st hand, 2nd hand, gossip or hearsay - about this kind of situation and whether it ended well or not.

With most folks, in fact, I'd say 99.9% of them, don't expect to get back any of the money you lent away.

That bitch needs to sell his second house. What a doucher.

I have loned friends money twice. I think the biggest loan I did was about 15 grand. This was somebody who is pretty much my best friend in the world and have known since we were kids. His wife got a once in a lifetime job opprotunity out in california for a really large salary but they were having a problem with the old chicken and the egg situation. They needed money now so she could get out there and get setup so she could start cashing in on that large salary. I basically gave them a loan so she could get out there get a used car and an apartment and get setup so that they could work the move to get him out there.

It worked out fine in the end for me wound up getting repaid in about two years after I made the loan.

One reason I felt less concerned with this was these two are pretty much my backup plan incase life really fucks me up and I have dibbs on their spare bedroom in case of disaster so helping them in a tight spot likely will wind up with them eventually helping me in the same way if the poop ever hit the fan.

I am single though so I had no wife to have to pass this through and even with all the reasons to do it there was some risk involved and that is a shitload of money to just hang out there. If you are married and the wife says no I would not do the loan. Money matters are a great way to break up a relationship and if the loan went bust you would be not only out of money but may find yourself with a collasal amount of wife agro.

No, not unless you are incredibly rich and can afford to burn the money.

Several years before I even met my wife, I loaned a large sum of money to a very close long term friend and it ended very poorly. Which is why I arrived at my current attitude towards lending friends money. That stance is to not loan money to friend under any circumstance. I say if you value your friends, just give it to them, with no expectations of repayment. That is the only way it can work out well for the friendship in the end. This way if they don't pay you back no harm no foul, and if they do pay you back then its a sweet bonus.

This very experience is the reason why I trust heavily in my wife's wisdom and outlook regarding my relationships with people that I care about.  I am generally quick to make choices that might burn me badly in the interest of being loyal. She helps balance that a great deal.  If a man doesn't value his wife's wisdom and feelings, then why marry in the first place?

When I first moved to Austin I racked up a sizable debt and haven't been in a place to get rid of it since moving here. It's pretty much the ONLY source of stress in my life and I have no clue when I can pay it off/ever. But I'll never ask for money to help pay it off because if I clearly can't kill this debt and wouldn't want to put that on a friend.

Basically, what I'm getting at: The moment he asked for money, he stopped being your friend.

Yes, but that can take months and he needs money now.  Clearly, though, he has waited too long on the hope that his business will turn.

Loaning delusional people money is even worse than loaning money to a friend.

Yeah, that's the way to approach it. Loaning this motherfucker money sounds like a slow, agonizing way to end a friendship. The quicker way is to say no, but sounds like you'll be better off in the long-term.

EDIT: Also, if this motherfucker needs to borrow money from a personal friend to pay for his BUSINESS EXPENSES - seriously, fuck him. There are bridge loans, lines of credit and all sorts of options out there for a business to get money at super-low interest rates to tide them over in rough times. If he's either exhausted all of those, or gotten them with the 2nd houses and shit and so can't use that property as collateral anymore, you are basically saving his business from going Chapter 11 and reorganizing. That makes you an owner/investor, not a friend loaning money. Very different terms of things. That shit is business and he's coming at you like it's personal.

Fuck that. Dump this shithead.

Ask for a large chunk of his business as collateral; or, maybe require large time slots at one of his vacay homes as interest.  I'd like to simply say "no, dont do it" but fact is there's a lot of ways to skin this cat.  Schild is right that he's not a very good friend asking for the money in the first place... so, going from there it wouldn't be much of a stretch to treat it much like a collateralized institutional loan.

I have no sympathy for finance guys and brokers though; sorry if you're one of them, but...  I just don't.

I'd tell him to stop wasting his money on private school, first.

The only way I ever lend money to people is if I am able to consider it a gift from the outset. That means I need to be able to comfortably afford it *and* have enough love for the person to be prepared to give them whatever amount of money (or anything else) it is.

That way it's just a positive experience. If you don't get the money back then that's fine, you never expected to. If you do get it back then it just feels like another gift in return.

I learned that this was the only way to safely loan anything to anyone when I was in my early 20's, mostly as a result of lending money to family members, most notably one of my brothers. He fully intended to pay back every single thing, but never, ever did. Those mistakes are an impediment to our relationship even now, more than 20 years later.

Ted Beneke will never turn his shit around.

I'm not sure there's a person on this planet that I'd give any significant amount of money to. There's maybe a few exceptions, but those are corner cases I hope never to encounter.   And in those cases, I would not expect to see the money again.

The #1 rule of loaning money to people you know:  Don't expect to get any of that money back.  As long as you're okay with that, then go for it.

As a real life recent example, one of my wife's friends came over a few months ago bawling about not having enough food to put on the table for her kid.  So we gave her $100 to get her through to next paycheck.  The very next day she posted on fb that she bought a new coffee table...

Luckily my wife's first words were "Well, I learned my lesson."  yay!

If a (good) friend asked me money to help him over a rough patch in his/her personal life (and there was a reasonable sounding plan to pay it back eventually) I'd probably loan it if it wasn't too much.
I wouldn't loan the money to help his business unless I had some (real) collateral since any business that can't get money from the bank for the sum I could loan isn't financially sound.

There's a word for someone with a vacation house living beyond his means who asks you for money.

It's not 'friend'.

I'm descended from scots, so I don't give money to anyone.  Maybe if it's a GOOD friend and the trouble wasn't his fault.  Maybe.  More likely I'd give advice.

... to take this further, most people of significant wealth have no real friends, both because they constantly live exponentially outside their means and/or give loans.  This goes for family as well, sadly.

Note: it's different if you're both taking a financial risk together on something you both want to do.

Truer words were never spoken. I have never loaned friends money and I doubt I would. I have given gifts, advice and personal time to friends in need but never money.

Recently loaned a buddy of mine some cash. He's in bad shape out in Portland with Lyme's Disease and he's not able to get disability while finishing up a county degree, and him and his fiancee were about to get evicted. She's supposed to be getting a decent job early 2014, plus a decent tax refund, so I said fuck it and wired some cash.

Granted, he was only asking for $500 and I sent $1000 so it's not a super big deal. Also, I've known him for more than 20 years. I don't really expect him to pay it back, but good for him if he manages it.

I'd like to elaborate on what I said above:

If a friend needed cash, I would just give it to them. But that comes with the caveat of him not working in finance and having 3 kids in private school, a second home, and a host of other solvable self-inflicted ruinous problems.

You never loan money to friends, you give it to them and when they return it back you are pleasantly surprised. If its not money you can do without, you don't give it.

Even if he was your friend now, he wouldn't be anymore after you have to ask him when you get your money back for a while.

Well, duh! She obviously needed a table to put the food on, as well. :P

Gods no. Count the silver when he leaves the house.

He's already tapped the vacation home = he has lost the vacation home.

The tax return thing doesn't sound right either. If your business is going down, can't you adjust your estimated tax payments to compensate?

I've only loaned money to a friend once, and that was just leaving high school when my best friend needed a large sum of cash to bail his little brother out of some serious trouble that he didn't want their parents to know about, as well as to finance his trip and first few months living in New York before his scholarship would kick in. I told him it was a loan, but never expected re-payment. The loan pretty much cleaned me out and was one of the contributing factors to a serious impact on my life, but I would do it again given the situation, but he was the only friend I've ever had that I would have loaned money to.

Much to my surprise, about six years after the fact when he moved back here, to take care of his parents, he re-paid me the entire sum, with a bit of interest, over the next couple years. His fiance was livid he was repaying me, as we hadn't kept in touch and it was a fairly large amount of money. Almost ruined their relationship (and she still hates me, but I think that's more because I'm an asshole than the debt).

In general, you never loan money to anyone and expect repayment, but rather give it. If they don't repay the money you expected as much. If they do.. its a nice surprise. In your case I'd tell him to sell a kidney before I'd even consider giving him anything.

1 - Request the tax returns from the prior 3 years.
2 - Request the current financial statements and the prior 2 years.
3 - Compare.
4 - See if the guy has any assets at all that aren't related to office furniture (my guess is no since he's a finance guy)
5 - See what loans he's already got on the business.
6 - Tell him the only way you'd consider it is if you were a preferred stock investor. No loans.
7 - Watch the freakout when you even dare to ask for this information.

Loan him the money. Post the results here.

Fairly sure no-one needs to hear my opinion here.

 :ye_gods:

 :popcorn:

Is it 'cockwomble'?  It's 'cockwomble,' isn't it.

If Paelos had made this post I could've made his title "Accountant Cockwomble." Thanks for nothing.

Again I'm no help. It was either that or Accountant Bawbag.

Both those titles may contain traces of Ironwood.

Then when the friendship starts going south, consult Nerf for advice.

Remember to take lots of pictures and buy a dog, not necessarily in that order.

The tax return thing is probably wrong. Generally you only get money back from a tax return if you've payed too much due to withholding. Losses can be deferred on income but cannot generate rebates. He says 5-8x the loan amount on the refund and since Median Household Income is like 40k at least then that is 200-300k of "tax return". That is a LOT of return which, if it could easily be show would happen, would make a bridge loan from a bank very easily accessible. Since he is a finance guy he should both know this and also know bankers to ask for the money. Since he didn't go to them you know things are crazy.

He can't pay the money back. His world is probably collapsing.

If it's a business he can do a carryback of his loss. I believe that's what he'd be trying. The carryback would go against prior gains and tax paid, thus getting a refund for the prior year.

Sending you a PM, Paelos.

I'd give it, but not lend it.  Lending money implies I want it back.  If I need the money back, I really can't afford it.  I've given money to my nephew and a couple of friends in the past.  I never got any of it back and since I never expected to, I never lost a friend that way.  I don't ask people for money either although I'll spend it if they leave it lying around unattended.

I have little to add beyond, agreeing that he should have other means to get his hands on money.  Especially with those luxuries and working in finance.  That he's "tapped out" on the house and coming to you, Goum is right that his world is crumbling.

Expect bad, ugly stories and possibly darker things in the future. Do not get entangled in them.

Rule one of money is never loan to a friend you want to keep or family you expect to continue seeing.

I think you mean obvious wealth.  Otherwise, yes.

Tell him no and blame it on your wife.  She'd do the same to you :P

I like this new guy. :awesome_for_real:

New guy?
Date Registered:    December 13, 2008, 03:05:23 pm

No.

You can carryback net operating losses (NOLs) to the previous two years (three/five years occasionally).  Net operating losses are business losses, which means a loss on your Schedule C for a personal business/single member LLC or Schedule E for a partnership/multiple member LLC.  These losses, on an individual return, can also offset wages in the current year or previous years.  In an industry or business with some volatility (or if the business had a major issue/catastrophe in one year) it is entirely possible that you could have a very large net income in one year and a large loss in another.  It is also a large part of why folks had no problems at my old job in paying our firm alot of money to do tax planning in June and December.  Businesses taxed as corporations function the same, which you may remember from the wave of articles at the start of the last recession about large corporations with negative tax rates....  a large portion was due to the carryback of NOLs.

In my experience, banks will look at carrybacks but don't place much emphasis on them because they are still subject to the IRS agreeing and paying the money.  That is too much uncertainty for most regular banks.  First and foremost they look at revenues/net income and then assets, and it sounds like this guy has big losses and few assets (or the assets are already pledged to other obligations).

It's a plausible story, but there is no way unless you sat down with an accounting professional and two to three years of your friends books and tax returns that you could verify it.

don't do it.... seriously.... don't

Interesting. I thought that it only went the other way. My mistake.

That being said. If he really needed a bridge loan why wouldn't a bank sit down and go over the books to verify those. It seems like they would be able to handle something like that fairly easily.

You could go all loan shark on him.  Hire some guy to break his legs if he doesn't pay, etc. 

I'd only do it if I had hard collateral in first position (have done family loans like that), and even then I probably wouldn't.

Worst I've ever done was give 2000 EUR (to someone in the US, so it translated into roughly $3 grand), but it was family, and I never expect to be repaid. Said family member is a legendary dilettante, but needed the cash as a bridge after ending a bad relationship, to help out while looking for a new job and pay to get into some kind of nursing school. Given that my profession pays dick, that's over half a year's savings for me. Still, family in need.

Sounds noble, the relationship bit was genuine, but I expected the rest was mostly a cover story. This family member once asked for $1k to start a business, using "chakra energy crystals" to farm ants. A guaranteed success, I tells ya. No, I didn't fund that one.

Money ended up going towards a used-car purchase, some Ikea furniture and yet another harebrained get-rich-quick scheme. Fortunately, said person landed a halfway decent sales job shortly thereafter and has had sufficient chutzpah to job-hop before their crazy ruins any single position. I keep a little stash of "family money" on the side now for bailing out idiocy to which I can't say no.

I've never lent anyone more than £50 but I wouldn't even do that any more unless it was a member of my family. It's a way of ending friendships and sometimes revealing a side of people's personality you'd rather not see.

Some people don't quite grasp that they actually have to pay you back when they said they would. They don't get that asking them to give back the money they borrowed is different to simply asking them to give you some of their money.

I've also had people tell me that they've repaid the loan to a third party. As far as I could tell, they sincerely believed that this meant they no longer had to repay me.

You can try negotiating with your family to give him a smaller amount that won't break you, but he probably won't appreciate it because it won't meet his current needs.  Otherwise, if your family and other friends have said no, don't put this guy ahead of them.  It's between losing him as a friend and losing everyone else when he doesn't pay.

Yep.

So I was thinking about this in the shower. And damn you all for that.

Anyway, I came up with a solution for you. Loan him the money, but put a lien on his vacation home.

 :grin:

I told him no, asserting that it would cause undo stress on my relationship with my wife which I always have to put first.  She had agreed to be the "bad guy".  He thanked me for considering it.

I will necro this thread when I learn something new in a few months time.  For now, keep it up.  I have enjoyed this thread.

Do you have a hot wife? Post pics. And some of your dog.

Is there some way you can involve your lawn?  :why_so_serious:

Ok.
 

If the end of this story involves any sort of local news story, video of a perp walk or anything involving jail time, I expect links to all of it. Also, blogging. There must be blogging.  :why_so_serious:

It really does sound like dude's business is going down the shitter and dragging his comfortable life style with it. You would just be shit to shovel down the pipe in the hopes it clogs before he has to start breathing the brown.

I'd never lend money that I wasn't willing to give (if push came to shove). 

Every story I've heard from friends and family have either:

• Ended with the end of the relationship
• Started with the assumption that it's not a loan but in fact a gift with no actual expectation of return (even if there's a stated one).

Or, short form: you go to the bank for a loan. You go to family or friends for a gift.

I despise his avatar.

I wasn't sure who the "new" guy was until I read that. 

Something else to consider. (http://www.komonews.com/news/crime/Police-Man-shoots-friend-for-not-loaning-him-money-236402961.html)

Just sayin'.

Nice to know I'm stilll everyone's go-to guy when it comes to making terrible decisions.

And just since shiz shafted y'all on dog pics, heres Einstein and his half brother, Skwisgaar

Edit:  Meh, dropbox is being dumb.  Here's Skwisgaar being adorable.

(https://dl.dropboxusercontent.com/u/86041/Eingaar/IMAG0532.jpg)

(https://dl.dropboxusercontent.com/u/86041/Eingaar/IMAG0475_small.jpg)

So I have an update.  He came back this week.  This time I asked more questions.  He only needs the money to keep his business afloat.  He rents his apartment but owns his vacation home (which he has already tapped out).  Private school is already paid for through the end of the school year.

he had not actually tried to get a loan collateralized by his expected tax refund.  he is going to ask one of his banks about that tomorrow.  Another friend has offered him $25,000 if he can find the rest of the money, basically a pledge matching other pledges. 

On the one hand I feel better that this is just his business and not his life collapsing.  On the other hand, I wonder why he just doesn't fold it up and hang out a new shingle six months from now.  His only real liabilities are office rent and some debt which he could ditch in bankruptcy. 

I am still not inclined to lend him money, but I did promise updates so...

Can you just hang out a new shingle after you go bankrupt?  Won't he lose his stuff?  Like the vacation house? 

He needs to offer you stretch goals if you donate. Like more ships.l

If you give him $1, do you get your name in the credits?

IIRC it depends on how he has structured his business. It should be possible to structure a personal company in such a way as personal assets are shielded. But this is not always the case and not everyone does that for various reasons. I am sure there is a lawyer or accountant here who is more in the know about this type of thing

Don't do it unless you can afford to lose the money. If it really, truly is for his business (and even that I'd be skeptical of) then he's asking for something like an interest free loan that may or may not be enough to cover what he needs.

If a bank or financial institution won't give him the money, then you know that things are perhaps worse than he's letting on. After all, how far down the line are you when it comes to people he may have asked for money? Have they already paid up? Or rejected his query?

In the event his business folds, you'd be (as described) a good way down the list of creditors in terms of getting repaid.

I would never lend money I was not willing to give, and I would NEVER go into business (partnering or lending) with a friend that I wouldn't be able to accept losing. 

If you ever get a chance to talk to an IRS Revenue Agent, ask them if they have any good stories about friends and money.  They often get brought in to investigate situations in which friends were in business together (partners or lenders).  The stories I've heard usually follow the same story - the guy actually in business does crazy stuff, including lying, to keep his business afloat: and the other guy (who usually only put in money) thought his friend wouldn't lie to him.

Shit ask a CPA the same question. When it goes wrong, it goes REALLY wrong. Like a divorce.

ARISE!

The please for help have now shifted to "I need $35,000 so my kids can finish the year in their school before we move to Montana and hunker down for a year so I can get back on my feet."  The big tax refund turned out to be only $67,000, not the $200,000+ he originally represented.

Not unexpected, but  :ye_gods:

I understand where he's coming from on this point. People with kids in private schools are horrified of distrupting their kids lives and yanking them out mid-year over their financial problems. That's at least what they tell themselves. If you get them to strip away the bullshit, what they are REALLY horrified of is the community knowing that shit has hit the fan, and they can no longer deny they are in huge trouble to themselves or their spouses. Pulling the kids out of private school is basically a flashing neon sign to the other big money "friends" of yours that you fucked up.

For the people I've had as clients that dealt with this, some go through it, and come out the other side realizing how deeply skewed their value system was. They are better people now than they were before. Then, on the other side you have the people that learned nothing, and call me to complain because the IRS has a tax lein on them which means they can't get a new lease on their Mercedes.  :oh_i_see:

To his credit, his wife is not in the dark. 

Look, I want this to work out for him, but it is clear that if I had helped him initially my money would likely be gone forever.

Who could have guessed ?

A shocking turn of events. This guy is a shitheel.

Well yeah. Desperate people lie. He knew exactly what his refund would be since you it's a number you file on a return. It's not a mystery grab bag.

Does he still have the business? Are you still friends?

How can a person living in an apartment that he's renting yet owns a vacation home afford private school tuition for 3 kids? Maybe my priorities are all wrong.

Maybe he has a lot of generous yet gullible friends ?

The guy is going to either learn a lesson out of this about what matters, or he's going to completely miss the point and ruin his family in the process until the wife leaves him and takes the kids. I've seen it go both ways.

How hawt is the wife btw?  Post pics.  Mayhaps she be available soon.

I'll put a hundred on the second one.

Never seen it go the first way. Always the second.

To be fair, I've seen a lot of these with clients. I'd say the percentages is about 20/80.

Update with semi-good news.

So "Tim" had a come to jesus moment with a group of us back in March.  Several of us sent him $2K each.  That was just a number that we could afford to lose and that as a total sum would help him cover some things.  Since then, his business has gotten a bit better but he vacated his expensive apartment and moved to a much cheaper one uptown.  His wife and kids are going to spend the summer at their Montana house and if things don't improve enough so that they can vacate Harlem, then he is moving to Montana and try and run his business from there (which is conceivable, but certainly not optimal).

All that said, the group of us that lent him the money, just got an email with the above report and a request for how we want to be paid back since he can afford to do so now.

So he made some tough choices, but things are turning around enough that he can honor his promise to repay.

Good for him getting out of the financial stupidity cycle. Hopefully that money hits everyone's accounts.

Good idea diffusing the risk amongst multiple people (added social pressure to repay) than to put it all on yourself. A friend relationship is tough to be objective about when financial issues are between the two of you.

I had a friend that needed emergency money for medication and to cover rent. I have been burned multiple times on naively giving money to friends who needed it. The first thing I asked her was how she planned to repay -- her income, etc. Her work has been steady and I recall seeing a 401k statement at her apartment while visiting, which she indicated she could (eventually) take out a loan on. I trusted her to repay. She wasn't going anywhere -- had a kid, been local for years.

As a form of contract I asked for 4 post-dated checks in the amount I loaned ($400), zero interest because I can't exact that on a friend. So far, so good. But when you start getting into tens of thousands territories... shit!

I feel like a pauper reading this thread.  If I had a friend ask for money my response would just be along the lines of "Ha, right, good one, like I have extra money laying around to give you."

While I'm glad your friend got his shit together, I was kind of hoping for a more Nerftastic ending.