Lending £50k to a person I know, is there any legal template in place?

bris

Voyager2002 said:

No one else has mentioned this, but in the OP you indicate that he promises to give you back your original loan with interest. Now, unless you are a licensed money-lender it is a criminal offence to lend money for interest. 

No it's not, you can charge interest, you can cover the lost interest that you would have made with the 50k

It's illegal to be a money lender, this is a one of loan to a friend, it's not illegal to cover the interest.

MCG313

10% over 18 months is a very poor return for something that sounds as risky as this.

Don't lend him the money, you won't get it back. You sound a bit gullible to be honest in that you're keeping the idea going even after practically everyone has told you its a bad idea.

You've also not specified what his investment opportunity is. Would guess at something at something dodgy like cryptocurrency or forex trading

[Deleted User]

MCG313 said:

10% over 18 months is a very poor return for something that sounds as risky as this.

Don't lend him the money, you won't get it back. You sound a bit gullible to be honest in that you're keeping the idea going even after practically everyone has told you its a bad idea.

You've also not specified what his investment opportunity is. Would guess at something at something dodgy like cryptocurrency or forex trading

OP has already said they won't lend the money

ileven1225

Yes, i have decided not to lend the money and the reason was also updated in the original post (1st page) with some further comments.

cymruchris

ileven1225 said:

Yes, i have decided not to lend the money and the reason was also updated in the original post (1st page) with some further comments.

That's a good decision. It'll be interesting to know whether your friend still remains as your friend once they know you're not in a position to 'loan/give away' your money. As others have pointed out - if it genuinely is an amazing idea - foolproof - guaranteed to make money - then with a decent business plan - a bank would more likely happily back it. If that's not happening - then maybe it's not as foolproof and guaranteed as they make out. 

ileven1225

cymruchris said:

ileven1225 said:

Yes, i have decided not to lend the money and the reason was also updated in the original post (1st page) with some further comments.

That's a good decision. It'll be interesting to know whether your friend still remains as your friend once they know you're not in a position to 'loan/give away' your money. As others have pointed out - if it genuinely is an amazing idea - foolproof - guaranteed to make money - then with a decent business plan - a bank would more likely happily back it. If that's not happening - then maybe it's not as foolproof and guaranteed as they make out. 

yes...we are still friends and just had a few drinks over weekends. I found out that his credit score was a bit low due to some small CCJ claims in the past and that's probably why he did not get loan from banks. However, we are still friends and going out together, just for business I would be more careful which he understood fully.

cymruchris

ileven1225 said:

cymruchris said:

ileven1225 said:

Yes, i have decided not to lend the money and the reason was also updated in the original post (1st page) with some further comments.

That's a good decision. It'll be interesting to know whether your friend still remains as your friend once they know you're not in a position to 'loan/give away' your money. As others have pointed out - if it genuinely is an amazing idea - foolproof - guaranteed to make money - then with a decent business plan - a bank would more likely happily back it. If that's not happening - then maybe it's not as foolproof and guaranteed as they make out. 

yes...we are still friends and just had a few drinks over weekends. I found out that his credit score was a bit low due to some small CCJ claims in the past and that's probably why he did not get loan from banks. However, we are still friends and going out together, just for business I would be more careful which he understood fully.

That's good to hear - having some CCJ's against him would also be a red warning flag - as it might indicate previously people have tried to recover funds from him and failed. But if he's happy to keep enjoying a few pints, and you stay friends then that's all good. As mentioned don't let yourself fall into the trap of trusting someone and what would be essentially giving away your money no matter what piece of paper you had - unless you were in the position to be able to afford the total loss of that money. 

LaDerniereSemaine

pjcox2005 said:

Grumpy_chap said:

ileven1225 said:

I am investigint options and if I like his project why not becoming a partner?

Because it sounds like you do not have enough information on the business plan and you cannot afford to lose the £50k.  If you can afford to lose the £50k and the proposed business partner can provide a robust business plan then this may be worth consideration.  I suspect, if the proposed business partner had that robust business plan, they would simply obtain finance from a bank.

The majority of start ups are not funded by banks, so saying if the idea is good a bank would just lend seems simplistic. Potentially they may lend if you've given additional security like your home, but many individuals may not want that as a purpose of a limited company is to limit liability.

I'm not saying invest, your friends idea and capability may both be rubbish, i just don't get the constant no or extreme negative response (although I accept you should look at the threads on lending to friends which can end badly). Some of the best entrepreneurs succeed as they are not risk adverse like i would be - for example, what's app need $250k from 5 friends/investors to assist it's growth - think they probably got a good return considering it's now valued in the billions.

If you go as a director of a company, then get a shareholders agreement, advice from lawyers and accountants but realise it opens you up to even more risk potentially than just £50k if you're business partner isn't trustworthy. The uncertainty you have suggests this isn't something to invest in but only you can make that decision.

Those entrepreneurs have massive bank balances to bankroll their risky investments.  Does the OP?

When you see multimillionaires on Dragons' Den not splashing around 50k at a time to everyone who jumps into the lift do you think they're idiots, or perhaps they know a bit more than you do about business?

pjcox2005

LaDerniereSemaine said:

pjcox2005 said:

Grumpy_chap said:

ileven1225 said:

I am investigint options and if I like his project why not becoming a partner?

Because it sounds like you do not have enough information on the business plan and you cannot afford to lose the £50k.  If you can afford to lose the £50k and the proposed business partner can provide a robust business plan then this may be worth consideration.  I suspect, if the proposed business partner had that robust business plan, they would simply obtain finance from a bank.

The majority of start ups are not funded by banks, so saying if the idea is good a bank would just lend seems simplistic. Potentially they may lend if you've given additional security like your home, but many individuals may not want that as a purpose of a limited company is to limit liability.

I'm not saying invest, your friends idea and capability may both be rubbish, i just don't get the constant no or extreme negative response (although I accept you should look at the threads on lending to friends which can end badly). Some of the best entrepreneurs succeed as they are not risk adverse like i would be - for example, what's app need $250k from 5 friends/investors to assist it's growth - think they probably got a good return considering it's now valued in the billions.

If you go as a director of a company, then get a shareholders agreement, advice from lawyers and accountants but realise it opens you up to even more risk potentially than just £50k if you're business partner isn't trustworthy. The uncertainty you have suggests this isn't something to invest in but only you can make that decision.

Those entrepreneurs have massive bank balances to bankroll their risky investments.  Does the OP?

When you see multimillionaires on Dragons' Den not splashing around 50k at a time to everyone who jumps into the lift do you think they're idiots, or perhaps they know a bit more than you do about business?

Fully agree, I wouldn't lend the money as the amount is to big compared with my personal wealth but I more point it out in response to the blanket statements of "any good start up would go to the bank" or "lending always ends badly" as clearly this is not the case and there are opportunities where lending works well.

This is probably unlikely for most individuals so the message of caution is good, just not the blanket statements. In this case the OP has probably made a wise choice, but we don't know the OPs wealth, the business idea or a 100 other points to comment on the opportunity. 

It's a bit like on other parts of the board where people ask best way to get a car loan and invariably met with you shouldn't borrow. Worth pointing out that it's a depreciating asset and the burden of the loan, but ultimately would they be better if people discussed options to finance it and what to look out for to get a low rate. In some cases, a car loan may be perfectly acceptable.

Ergates

pjcox2005 said:

Grumpy_chap said:

ileven1225 said:

I am investigint options and if I like his project why not becoming a partner?

Because it sounds like you do not have enough information on the business plan and you cannot afford to lose the £50k.  If you can afford to lose the £50k and the proposed business partner can provide a robust business plan then this may be worth consideration.  I suspect, if the proposed business partner had that robust business plan, they would simply obtain finance from a bank.

The majority of start ups are not funded by banks, so saying if the idea is good a bank would just lend seems simplistic. Potentially they may lend if you've given additional security like your home, but many individuals may not want that as a purpose of a limited company is to limit liability.

I'm not saying invest, your friends idea and capability may both be rubbish, i just don't get the constant no or extreme negative response (although I accept you should look at the threads on lending to friends which can end badly). Some of the best entrepreneurs succeed as they are not risk adverse like i would be - for example, what's app need $250k from 5 friends/investors to assist it's growth - think they probably got a good return considering it's now valued in the billions.

If you go as a director of a company, then get a shareholders agreement, advice from lawyers and accountants but realise it opens you up to even more risk potentially than just £50k if you're business partner isn't trustworthy. The uncertainty you have suggests this isn't something to invest in but only you can make that decision.

Most startups fail, and most investors in startups lose all their money.  If they're rich then it might be a worthwhile gamble, but no "ordinary" person should invest in such a scheme  (by ordinary I mean anyone who wouldn't wave goodbye to £50k without it seriously impacting their life).