Submitted by Locutus747 t3_126oslu in personalfinance
Hi. My wife and I were considering lending $15,000 to a family friend to help them purchase a small business. We wrote up a loan agreement with payment and interest terms. They are asking for a copy of our drivers licenses with the agreement, which led to some hesitation on my part. Is the written agreement enough? Why would they need/want our DL information?
Exactly this.
They actually obtained almost $60,000 from the bank and this is the remainder that they need.
Got it. Per the usual "don't loan to friends/family", if you're still planning to move forward with it, I would get a lawyer involved in your contract. Make sure that it's not just dead paper that means nothing.
They don’t need your drivers license for any reason.
If the agreement needs notarized then the notary will want to see your drivers license to confirm your identity but the friend doesn’t need to see that.
As others have said this is a great way to turn good friends into strangers who ignore you really fast. It sounds like you’re going to go through with it but if you can back out I would. If they have access to 60k but not the remaining 15k the question for me would be “why would the bank give them nearly enough but not the full amount?”
I hope this works out for you. Best of luck!
Thanks. I think we may not do it. As someone else aluded to I’m not a bank. And if someone can’t afford something should that be my responsibility? It would be one thing if friends were asking for help with rent or necessities or something but if you can’t afford to buy a business without asking friends for money then maybe you shouldn’t buy a business
Exactly. Usually “friends” bring up the idea “venting” hoping that you would offer to help. How they respond to you backing out will tell you everything. I’d have a good story that they can’t argue with that’s short like “we were going over the finances and things are a lot tighter than we thought. I thought we could stretch to help you but we cannot. I’m sorry”. If they in any way try to convince you otherwise that’s a huge red flag to me.
Are they offering their driver's license information as well? It does seem odd, unless it's some sort of bank thing. Banks now require ID before you can open an account, but, unless they're planning to use your ID to open an account (red flag!), they normally wouldn't need your DL info
I do not know why they would need that, and I would ask them why they need that. You're holding all of the risk for this one, so you kinda call the shots.
Also, the usual advice is to not loan to family or friends, but it sounds like you're past that.
Why would you not ask for a partnership agreement instead of a loan? This is where the term 'silent partner' was born.
If the business does well, you're the last one to get paid, in a "friend's money" loan arrangement. Similarly, if the business doesn't do well, you're the last one to get paid in this arrangement.
Banks provide loans.
Very rarely do situations like this work out. I'd be very nervous on why the bank would fund most of it, but not all of it - clearly there is a risk there that they are seeing. Also, $15K is a hunk of money to donate on a really big maybe. Starting a business is rough, there are ups and downs, and as the "friends" you will be the last to be paid back, and that's IF you ever are.
You're not saying what the business is though, either. If it's an established business (say, a restaurant as an example) that has been doing well enough, and they are simply taking it over (and have the experience to do so), then I might be more open to the idea. Starting something from scratch, however, I would probably pass on investing in, at least until they can show how the bank's loan is getting paid back and money is coming in...
Yes they’re taking an existing business over due to the owner retiring and looking to sell rather than starting from scratch.
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Just FYI you should realize that most businesses fail, and fail quickly. If a bank isn't willing to take a risk on their business, I don't think you should be either. There is zero guarantee they will be able to pay you back, and taking a family friend to court because they lost their business and can't pay you back is not going to make you feel all warm and fuzzy inside.
We know it’s a possibility of course
I would be suspicious of this. If they get your DL info then they can use it to open other accounts for them I. Your name. Years ago I leased my house to a family member with the option to buy it for what I owed. The housing market when through the roof after that. They ended up with almost 200k in equity. They decided to buy for what was left. They wanted me to pay all closing costs and make other concessions. I told them they were already getting 200k. What else did they want. A couple years later they lost the house due to pulling all the equity out. I still don’t talk to them.
Yes them asking for for the DL was a red flag for me and I wanted to gets other people’s thoughts on this before asking them in case I was missing something
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>Why would they need/want our DL information?
Why haven't you asked them?
This all sounds like a terrible idea to me.
“Turns out we had some unexpected expenses come up so we will be unable to provide the loan. Good luck with your new business venture!”
Please do yourself a favor and back out. This is a bad situation in the making. If they were able to get the $60,000 then they can figure out the other $15,000
Already did. Thanks to everyone
Subject_Technician89 t1_jea0ubt wrote
The fact that they can't obtain a small business loan for $15,000 from a bank is concerning. I would look at the $15,000 loan as a gift - you may not get it back.
Edit: how well do you know them? Seems odd that you can't just ask them why they want your DL information.