Have you or other family members ever lent capital money to another family member, to start a business or do an investment?

Circumstances can differ greatly, but whether it’s a gift, or money you can easily afford to lose or a real investment where you care a lot about the result – put the arrangement in writing.

I was involved with a family money dispute. One guy made a few $Millions investment in 2007 in real estate, at the peak of the market. Property values plummeted after that.

Several family members lent him between $50K and $200K each.

Ooops.

Lot’s of ill will, a divorce, siblings not speaking to each other, etc. followed.

In retrospect, one smart couple loaned the money with a mortgage on a property – instead of being out of luck, they legally took the property when the borrower/brother could not make scheduled payments.

They will soon probably be whole, not losing or winning in the end. And even though they had to foreclose on a relative, it was the smoothest of all the situations.

In short, lending to family is not much different than loaning to strangers. Make both sides put their obligations and expectations in writing at the beginning.

First, I have never lent or received money from family for a business. But, I have learned some principles about money and family that might help just a bit.

When it comes to money and family, I experience has taught me to pay family back first before any other lender, and to expect pay first if I make a loan. The key is being very clear, because it is such a curious interaction.

Too many people take ‘family money’ for granted. I wanted my Mom to make me a quilt, so I payed her a couple of hundred dollars to buy the materials, I sent her the kit I wanted, and I paid her a hundred dollars when she was done. She claimed that she would do it at cost, but she claims a lot and doesn’t deliver, so I paid her upfront and we all came to visit…she was working like crazy to get it done before we got there. It wasn’t perfect but it was good, and it was something my mother had made. My point is, I paid her before and after the transaction and it was a relatively smooth transaction.

It is weird that my mom actually moves slower when the customer is her family….curious.

Wow, I’ve never heard of anyone lending credit cards towards an investment, that’s kind of a wash for the negative. Lending real money though, I haven’t but it’s been lent to me when my ex husband and I started our own business.

No. I never loan money and I never sell a vehicle to a family member. Its just not good business to do so.

When they ask for a loan, I just tell them, “the bank and I have an agreement. I will not loan money and they will not arrest people”.

Worked out great, so far.

It is generally not a good idea.

At some point when I was very little my mother convinced my father to take some of their what must have been meager savings and lend some to my uncle, her brother, to support his business.

My father never got paid back. It gnawed at him for years and years, so much so that he complained to me about it a few days before he died, long after my mother and my uncle had passed away.

It is a situation best avoided.

Lending to anyone is always a risk. If you can’t afford to lose it don’t lend it. Period.
I have lent increments of 5k and 10k to a friend, short term with a good return of interest for the short term special need.

I GIVE to my daughter, other than a couple of short term loans that were paid back within several months. I like to be generous but I also don’t risk anything I couldn’t afford to lose long term. I believe in altruism more than loans.

Same as Coloma, I would rather give a gift of money to my parents, or whomever is in need. When people ask to borrow, I would rather give, with no expectations of return, that way I am not connected to that person in a negative way. Not that it is easy to get money from me or anything. The Marine Corps doesn’t pay THAT good…lol.

I have one close friend who I take turns buying lunch with, this is the closest I go to borrowing or lending at this point. If my friend asked me for 500$ then I would give it to him, and he is such a friend that I have no doubt he would give it back when he can afford to. I wish I could say that for family.

Lending/borrowing with family, for any reason, is fraught with hazard. I have a relative who used to “borrow” money occasionally but never really finished paying that back before needing more. Besides being frustrating to me that lent money wasn’t coming back, it was messing with our relationship. I quit lending money and now I consider a gift of money whenever a request comes. Sometimes it’s ‘yes’ sometimes it’s ‘no’, but it’s a cleaner transaction all around.