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My friend wants to borrow 5000 dollars to start her business. How to document that?

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  • My friend wants to borrow 5000 dollars to start her business. How to document that?

    My friend wants to borrow 5000 dollars to start her business.

    She says she will pay back 6000 in one year.
    How do I document that to make it binding, obviously its not worth hiring a lawyer so how do I do that?

  • #2
    You can find sample promissory notes online. You can write the agreement on a napkin and it will be binding. But that means nothing if she doesn't pay you back.

    Why can't she get a bank loan backed by the SBA? Has she tried? Has she been turned down? Do you think you are smarter than the people at the bank who won't lend her any money?

    The first rule about lending money to friends is DON'T.

    The second rule about lending money to friends is make sure it's money you can afford to lose because the chances of ever getting paid back are slim.


    • #3
      There is only legal advice here - nothing more. Focus not on personal perspectives, but on the interests of the investor. There`s no big secret here. People who invest money in the project are primarily interested in more income. At the same time it`s very important to protect your business project from encroachment. An investor can take it and appropriate it as his own idea. The minimum thing to do is to register your work with a notary. Very bold projects are far from easy to implement. It's better to provide an updated version of an existing business. I've applied to for financial advice and received good support so I'm not afraid to recommend it.


      • #4
        You can find sample promissory notes online. You can even write the agreement on a napkin, and it will be binding only if you respect the 3 parts of a contract. But that means nothing if your friend doesn't pay you back. The most important rule of giving money to friends is don't. I did it, and I definitely don't recommend it. You could contact a personal advisor if a lawyer is not welcomed. I hired one from when I landed money for my ex-friend. They'll help her find a better place to lend money from, with even less interest percentage.


        • #5
          Also many legal forms sites online have various types of loan documents that you can use as a model.


          • #6
            Frankly if you can find a lawyer to do it for a few hundred dollars it might be worth it!!


            • #7
              The best advice connected with loans I ever got was from, and it said never to lend money to your friends. It doesn't matter if you have it or if she doesn't like banks in general. Loaning money does destroy a friendship. There is a possibility that the interest rate in a bank might be lower, and in the end, she will have to pay less than 6000. There is always the chance that you might want the money back after a year, but she won't have it at the time. And you won't tell her anything because she is your friend, but it will be frustrating.


              • #8
                only 5k?


                • #9
                  Only 5000 dollars to start a freaking business? Are you even serious? Man, if you want to start a proper business that will bring you a good revenue, you need much more than just 5000 dollars. 5000 dollars might actually be enough only for a good business plan and nothing more. Even if you want to look for the best investment vehicles that money won't be enough for it. Honestly, I think you should advise her to think twice before taking any sort of a decision, because if she truly starts a business with 5000 dollars, she might lose it all.


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