A friend just asked to borrow a lot of money

[Goumindong]

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?

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.

[Paelos]

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.

[schild]

Sending you a PM, Paelos.

[Signe]

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.

[Merusk]

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.

[Yegolev]

... 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.

I think you mean obvious wealth.  Otherwise, yes.

[Senses]

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

[Yegolev]

I like this new guy.

[Rendakor]

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

[Johny Cee]

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?

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.

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.

[Fraeg]

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

[Goumindong]

You can carryback net operating losses (NOLs) to the previous two years (three/five years occasionally).

[...]
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).

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.

[Evildrider]

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

[Abagadro]

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.

[Yoru]

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.

[palmer_eldritch]

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.

[ajax34i]

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.

[Yegolev]

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

Yep.

[Sky]

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.

 

[shiznitz]

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.

[Sir T]

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

Is there some way you can involve your lawn? 

[shiznitz]

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

Is there some way you can involve your lawn? 

Ok.
 

[HaemishM]

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. 

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.

[jgsugden]

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

[Venkman]

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.

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.

[Der Helm]

I like this new guy.

I despise his avatar.

[Signe]

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

[WayAbvPar]

Something else to consider.

Just sayin'.

[Nerf]

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.

[shiznitz]

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...

[Signe]

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

[Paelos]

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

[proudft]

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

[Goumindong]

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

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

[UnSub]

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.