Did a quick search and couldn't find any specific topics on this...but please lock and consolidate if there's a duplicate.



So here's my situation:

I just graduated law school and I'm studying for the Bar exam down here in South Carolina. I've pretty much had a consistent part-time or full time job since I was 16 and I've managed to save about as much as you can while still paying for everything except for education. I take the Bar exam at the end of July, I'm going to Europe for 6 weeks starting in September 1st, and when I get back, my Bar results should come in about a week later.

Probably one of my best friends in law school (a year ahead of me) is starting his own solo firm. He graduated at the top of his class last year, had a great job with a big firm downtown, but after some mutual disagreements, they both decided to part ways and he's going solo.

He's already found a great office downtown and has got everything ready to go...just needs some money. We were having a drink the other night and he was talking about how the bank keeps dicking around (he asked for $25K), and its stressing him out. I asked him about a week ago how much money he needed and that I could help, but I think he shrugged it off because he didn't know how much I had. Well the other night he goes, "well, its tough, because you just don't have friends with $50K laying around." And I looked at him and I said..."I do....how much do you need." He was taken aback, I explained to him what I had, and he said that $10K would be perfect. That way he could ask for less from the bank and there's still a possibility of him getting some money his ex-wife owes him on some property and another friend he's waiting to hear back from.

So we talked a little more and I told him that I still had to think about it a little more but that I would get back to him by the end of the weekend.

To make it a little easier, here are my financials: $40K in an ING checking account, $8K in my banks checking account, and three years of a maxed out Roth IRA. I'll also have about $50K in law school debt (which my mom has teased me about helping out with).

Here are my job prospects: In the law field I have none. I haven't been searching because I honestly don't know if I want to practice law. However, I would really like to jump in with my friend after he gets a little more established (which we talked about and he said he would love to do). I got offered a bar managing position at this new bar that's about to open up near my house that I know is going to kill it (they already have a couple other places that are the busiest in town), where I would probably be making somewhere between $60-$80K ($25K salary plus my pick of bar shifts). So I'm not exactly set job-wise for the future, but I'm also not like a bunch of law school graduates that I know with nothing to fall back on and 120K in debt.

Extras: I was wanting to have a decent sized nest egg when I got back from Europe so maybe I could take some time and search really hard for a law job that I wanted or put some money into starting my own bar. Also wanted to have that money there in case I wanted to make a down payment on a house when I got back from Europe. Giving up the 10K now would probably put the house idea on hold until I've worked the bar managing job for a while. When I say this guy is a good friend...I mean he's really a good friend. He was going through a divorce last year while studying for the Bar and I was the first guy he went to. I've had some troubles over this past year too, and he's always been there for me. And he didn't come to me asking for the money, I offered it to him. He's smart as shit and a really hard worker, so I'm pretty confident that he will do well, but I know there are no guarantees. And if he sticks to the payment plan that he suggested, I'll also make a couple grand off of the loan.

I'm just a little torn. I've always been the guy friends go to when they need help (not monetary)...picking people up at the police station, driving hundreds of miles to pick up after cars have broken down, take you out to get shit-faced when you find out your girl is a whore, etc. So that was the mentality I first had when I offered to help...but then when I sat back and thought about it, I was like..."That's fucking ten grand John...think about this for a second."

Thoughts? Anyone have prior experiences? I've always heard it's not a good idea to lend friends money, because then it creates rifts. But isn't that what friends are for? I'm pretty sure this guy is going to succeed, and if I can help him do that, isn't that what I should do? It's not like I'm helping out a friend who's a degenerate gambler or has been in jail several times. He was a fucking biochemistry major and graduated magna cum laude from undergrad and law school. Oh well...that's all I got. Advice appreciated. I'm pretty much leaning about 80% to going through with it.

[Edited on June 13, 2008 at 10:42 AM. Reason : .]

6/13/2008 10:39:48 AM

Why do you have 48K in checking accounts?

There are too many ways for this to end badly, but it sounds like you are looking to be talked into it rather than out of it.

6/13/2008 10:43:09 AM

^ agreed

if you're going to do it, just make sure you have something written down as far as his payment plan and all that.. but i'm sure you already know that.

i have no experience with anything like this because i have no money haha

6/13/2008 10:45:58 AM

I keep around 8K in my regular just to have it there. I always use credit cards for benefits and points and then pay them off right away from my checking account.

The 40K in ING is at least getting some interest (although a lot less then when I initially put it in there). And I'm pretty cautious with money because I didn't grow up with any. And I'm in this state of limbo to where I don't know what I'm going to do in the upcoming six months...so I just want to have the money readily available. Probably a bad excuse not to at least put it in a higher interest savings account, but I'm fine with it.

6/13/2008 10:47:29 AM

Quote :

" if you're going to do it, just make sure you have something written down as far as his payment plan and all that.. but i'm sure you already know that"

Already got a promissory note written up. Its pretty thorough, but then again, it doesn't matter if he goes insolvent.

6/13/2008 10:48:20 AM

Would you consider lending him the money if he weren't such a good friend? If not, then you shouldn't consider it now. Like you said, that's a lot of money to just throw at him because he is a friend and you feel like you should. However, since you were the one who brought it up, if you don't go through with it now, that could still harm the friendship. You seem to have put yourself in a bad spot.

6/13/2008 10:53:12 AM

Never loan that kind of money out

6/13/2008 10:58:16 AM

Plan on giving him the money. Anything you get back, consider it lucky.

6/13/2008 10:59:35 AM

Quote :

"Would you consider lending him the money if he weren't such a good friend? If not, then you shouldn't consider it now."

I don't think that's the same thing. I think that's a good comparison if you're talking about an investment. "Would you invest 10K in this business if it was a random person instead of a friend? If not, then you don't really believe in the investment but are just trying to help out a friend."

This isn't an investment, it's helping a friend. I'm not going into this to make money, I'm going in to it to get my friend on his feet so he can succeed. And I guess it could hurt things if I don't go through with it, but he's a pretty understanding guy. He knows my situation and was perfectly fine with me taking some time to think about it.

6/13/2008 11:00:47 AM

I meant do you really see him succeeding, and paying you the money back even if he fails? It's very easy to trust someone before the deal has gone down. Otherwise,

Quote :

"Plan on giving him the money. Anything you get back, consider it lucky."

6/13/2008 11:05:08 AM

Quote :

"I meant do you really see him succeeding, and paying you the money back even if he fails?"

I do really see him succeeding. I know nothing in life is 100%, but this guy has the personality and intelligence to be a great lawyer. I did Mock Trial with him, and he's just ridiculous in the courtroom. So I know there's definitely the possibility of him failing, because shit happens. But if he works the way he's capable of working, I know he'll be fine. And if he fails, then the Note allows me to accelerate maturity of the Note and demand all payments and interest immediately.

In accordance with the note, he's making payments right away. And he'll have plenty of capital to make payments for at least a year. So even if he fucks up royally, I plan on getting at least 1/3 of this back.

As someone stated earlier, I'm definitely trying to talk myself into this...but I'm really appreciating the feedback. I've still got some time to mull it over.

[Edited on June 13, 2008 at 11:20 AM. Reason : .]

6/13/2008 11:16:18 AM

can i be your friend?

6/13/2008 11:19:03 AM

Quote :

"And I'm pretty cautious with money because I didn't grow up with any"

Sure doesn't sound like it

6/13/2008 11:23:13 AM

^Ha...never been asked for money. As cautious as I am with money, its definitely overridden by my propensity to help friends and family out.

6/13/2008 11:27:47 AM

I figure if you loan someone money, never expect to see it back. my best friend still owes me $5000, that I loaned him when he was in legal trouble, and that was 3 years ago.And its ok, I'd rather have him out of trouble than in jail. just go into it knowing you might not get it back, or if you do it will be awhile. I still owe a good friend of mine several hundred dollars from a trip we took earlier this year. I'll get it back to him, its just that things are tight for me right now. so expect that it might take longer to see the money than you figured.

If somebody who was my friend came to me and needed that kind of money, I'd go to hell and back to get it for them, thats just how I operate.

Quote :

"And I'm pretty cautious with money because I didn't grow up with any"

I grew up real poor too, but you know what, its just fuckin money. you live with it, use it, dont worship the crap, dig? its just something to get you through the night. Friends are more important anyways.

6/13/2008 11:40:22 AM

Take some collateral

I know it seems like an asshole thing to do and kind of goes in the face of the whole 'friend helping another friend out' thinking, but its the only real retainer you can get in this kind of situation

And as far as getting the money back...if he's cool and pays it back in a reasonable amount of time (or keeps on track with his payments if you're doing it like that), then theres nothing to worry about. But if he keeps 'forgetting' to pay you back and the excuses get more and more bogus, you need to adapt a "Fuck you, pay me" mindset or else he'll continue to walk all over you.

It seems from the way you described it that you guys are boys so you shouldn't have too much to worry about, but money can make a man act funny, so it would be wise to cover all your bases

6/13/2008 12:01:41 PM

Quote :

"And as far as getting the money back...if he's cool and pays it back in a reasonable amount of time (or keeps on track with his payments if you're doing it like that), then theres nothing to worry about. But if he keeps 'forgetting' to pay you back and the excuses get more and more bogus, you need to adapt a "Fuck you, pay me" mindset or else he'll continue to walk all over you."

The promissory note is pretty iron clad about making payments and tacking on late fees and such. It still depends on how strict I want to enforce it...but my legal rights are pretty clear. I mean, we're both recent law school grads, so legally speaking everything is pretty cut and dry.

Quote :

"It seems from the way you described it that you guys are boys so you shouldn't have too much to worry about, but money can make a man act funny, so it would be wise to cover all your bases "

Yeah...I have no idea how I would act if they payments stopped coming or started to come late. When it comes to friends, I'm the last person in the world to say "you owe me a meal/drink/cab fare/ten bucks." If I get it back, I get it back...but I'm the last person that's going to get into an argument with someone over small monetary issues. But 10K is definitely a different world...make that a different universe. Hopefully it won't come to that though.

6/13/2008 12:08:07 PM

at least put the 40K into the Orange Savings account. After 30 days you can instantly transfer whatever you need back and forth.

6/13/2008 12:09:34 PM

Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it Don't do it, don't do it, don't do it

6/13/2008 12:09:35 PM

as long as you don't mind if he stiffs you, then do it.

6/13/2008 12:17:09 PM

Quote :

""And I'm pretty cautious with money because I didn't grow up with any""

You might be cautious, but damn, you could be a lot smarter with your money, too. Whether or not you loan this guy money.

6/13/2008 12:19:18 PM

yeah... i think he knew he was going to loan his friend the money regardless of what tww said, he just wanted to come on here and let everyone know he had 40k sitting in his ing account.

6/13/2008 12:24:39 PM

6/13/2008 12:30:24 PM

yea he could be making a nice chunk every year on interest.. hell i'm not sure how long he's been saving but he'd have significantly more than $40K if he had actually done something with it instead of just letting it sit there

i'm not saying play with high risk stocks but damn, do something at least..

6/13/2008 12:31:53 PM

i believe ING's savings account gets better interest than their checking account. i have ING's checking account, and i love it, but i agree that some/most/all of that money should be invested in something that will yield a higher return than a checking account.

but who knows, maybe loaning his friend this 10k will turn out to be a successful investment, and they become partners in the firm, and they get rich and live happily ever after.

6/13/2008 12:41:52 PM

I definitely wouldn't risk it. How long have you known the guy? The fact that he can't get the loan from a bank would put me on edge. What's his credit rating like? Have you ever lent him money before?

6/13/2008 12:44:56 PM

lewoods

Quote :

"Plan on giving him the money. Anything you get back, consider it lucky. "

this is the mindframe you should have. regardless of the odds or whatever contract you have drawn up. I have had a few friends fall victim to "investments" just like this. There is a definite chance you will not get back your initial investment. Roll the dice if you like the odds, but be prepared for WORST CASE SCENARIO i.e. REALITY.

Bottom line: people do not always reach their potential.

Best of luck with this though, since it seems you are going to go through with it. Things can and do work out...hope for the best, expect the worst.

6/13/2008 12:50:48 PM

Quote :

"hell i'm not sure how long he's been saving but he'd have significantly more than $40K if he had actually done something with it instead of just letting it sit there"

I've made most of my money in the past two years while working about 30-40hours a week at a bar and going to law school full-time. Not necessarily a good excuse, but I don't have a lot of time to sit there and plan what I want to do with money. I also didn't plan on the money piling up so fast.

Quote :

"but i agree that some/most/all of that money should be invested in something that will yield a higher return than a checking account."

I almost feel like its too late now. I've been making some semi-big purchases as far as plane tickets and Eurail passes. And I'm bout to spend a decent chunk while I'm in Europe. I could start moving shit around now, but what's it going to net me in the end, a couple hundred bucks?? When I get back from Europe, I plan on reevaluating my finances and start to do some more progressive stuff. But being in school, working all the time, and having no idea what I'm going to do with my life has kept me from making big moves with my money.

Quote :

"How long have you known the guy? The fact that he can't get the loan from a bank would put me on edge. What's his credit rating like? Have you ever lent him money before?"

I've only known him for three years...but I know more about him than anybody save his parents. I've been there with him when he's gone through some rough shit and vice versa. His credit isn't bad, but he's only a year removed from a divorce where his wife tried to bleed him dry before he even started his first job out of law school (although she's finally letting up a little bit in trying to advance him some cash on interest he has in some property they owned). And he has a decent amount of law school loans himself.

6/13/2008 12:52:33 PM

And lets not turn this into a "what to do with my finances" thread. That's another topic completely.

6/13/2008 12:53:14 PM

I always assumed anyone with a law license could not fail in business.

I mean the guy is going to be worth money as long as he does not become an alcoholic or die. I would get a formalized note drawn, pay yourself interest (more than your checking account pays, risk is higher here) and then get him to back it up with a personal guarantee etc etc.

I mean this is not you loaning your buddy money to pay rent or buy a car, this is basically a business loan. I would imagine if the note you get him to sign is worded correctly you will be able to collect it from him personally the rest of his life if he defaults on it.

It seems like the issue on this one is not wether or not you will get your money back, odds are you will. The issue might be if you have to become a bastard to recover it are you willing to do that and lose him as a friend.

I mean I have a few freinds that I have "loaned" money on a few occasions knowing full well I would never see it again. The thing is those freinds are also the ones that are down on there luck once in a while but are never too busy to help me do something when I need help so it evens out. If I actually had demanded the money back I would have lost some good friends and most likely the money too.

6/13/2008 12:58:45 PM

Quote :

"I would get a formalized note drawn, pay yourself interest (more than your checking account pays, risk is higher here) and then get him to back it up with a personal guarantee etc etc."

The note is pretty badass and does all of those things.

I'm glad I have gotten a few positive responses. Would have been pretty worried (moreso then I already was) if I hadn't.

6/13/2008 1:02:54 PM

I don't think you have enough money to be lending such a large amount to someone else.

I also think this would make things too easy for your friend. You have to work out of law school for more than a fucking year before somebody just hands you your own firm and says, "It's cool, man. Pay me back when you get a chance."

Shit, how can he know enough people to do this if he's only been out of school for a year?

[Edited on June 13, 2008 at 1:59 PM. Reason : ?]

6/13/2008 1:53:18 PM

Rule #1 of business.

Do not mix friends or family with your business. You either need to gift him the money as a friend, or loan him the money as a business. And it needs to be extremely clear cut which way you are going. This "im a friend, but ill be the banker" business will almost guaranteed end up souring your friendship. Promisory note or not, one of your feelings is going to get hurt the first time the "hey I'm your friend, why can't I do _____ differently" comes into play, and it will come into play.

^Also completely agree. Homeboy needs to put in SOME time to establish his credibility.

[Edited on June 13, 2008 at 2:06 PM. Reason : .]

6/13/2008 2:05:12 PM

I don't know about you, but I wouldn't mind GIVING my best friend $10K if he really needs it, and it will help him succeed in life, especially if I have close to $50K in my bank. So my answer is YES, lend him the money.

6/13/2008 2:18:19 PM

Loaning money to friends, no matter how good of friends that they are, is going to end badly.

Just a really awful idea.

6/13/2008 2:30:57 PM

i sent barack obama a link to this thread

6/13/2008 2:32:01 PM

Quote :

"Shit, how can he know enough people to do this if he's only been out of school for a year?"

I'm in Charleston, and although it seems like a decent sized town...its still one of those "everyone knows everyone" type of places. And he was pretty active in law school (Student Body President, clerked for a couple judges, had good summer jobs). He knew about as many people as you could possibly know by just being in law school (and he made a point of doing that). Then there is the fact that he's about as social as you can get.

Its easy to make a name for yourself in this town (downside is that its easy to make a bad name for yourself too). And he's done that pretty well already. His office is also in a big building with a shit-ton of solo practitioners and he's the only one that does business litigation. So he'll get lots of referrals from the other guys in the building. I'm not worried about him getting clients (he already has one corporate client and two individual clients wanting him to draw up wills).

6/13/2008 2:32:28 PM

Quote :

"Rule #1 of business. Do not mix friends or family with your business. "

I completely understand where this comes from...and I don't really disagree with it much at all.

But I know so many people who have successful businesses, restaurants, law firms that have been started with friends and/or family. I also know plenty of people who have gone into business with people they don't know personally and have been completely screwed over by them.

So as a general rule, I guess it's good to follow. But you have to take into account the totality of the circumstances.

6/13/2008 2:35:32 PM

You stated that you have no job prospects in the law field. Have you considered rather than loaning him the money, that you could instead invest in an equity share of his practice?

There are still some risks, but this could give you the job, give you some control over what happens with that money, and it could be much more lucrative over the long haul.

Good luck in whatever you decide.

6/13/2008 6:40:10 PM

I agree with considering it a gift... anything you get back is bonus. Plus it will strain your friendship if something happens and he cant pay you.

Where did his debt come from? If he isnt addressing the cause, he will be right back in this position and you will have lost your money. If he is still having spending or income issues the only thing your money is doing is like spitting on a house fire.

Dont do it.

Keep 6 months emergency account in ING. Put the rest in mutual funds.. but maybe wait until after the election. If it looks like one party might win and capital gains taxes will double.. there will be a huge sell off. Im holding out for now.

6/13/2008 6:47:15 PM

Quote :

"Where did his debt come from?"

Three years of law school and a divorce. I'm one of like five kids in law school who worked more than 20 hours a week...and none of them made the money I did bartending...so I'm kind of an anomaly as far as creating a nest egg while in school. And he used his Biochemistry degree to work in the lab after college. Tough work...but not exactly breaking the bank.

His only debt is from school loans...he just doesn't have extra cash lying around because his wife pretty much cleaned him out.

6/13/2008 7:19:08 PM

obvously the banks dont think it is a good idea.......


you should ask for his business plan.....if he doesnt have one...run....if he is serious he would have one with projections etc.

[Edited on June 13, 2008 at 7:59 PM. Reason : w]

6/13/2008 7:56:38 PM

Quote :

"I completely understand where this comes from...and I don't really disagree with it much at all. But I know so many people who have successful businesses, restaurants, law firms that have been started with friends and/or family. I also know plenty of people who have gone into business with people they don't know personally and have been completely screwed over by them. So as a general rule, I guess it's good to follow. But you have to take into account the totality of the circumstances."

This is not what I am talking about. Re-read my post. You either need to treat this as a friend helping a friend OR as a business loan/equity buy into his business. Not a mixture of both. Pick a side, be his friend or be his partner/investor/lender on this.

And either way you sure as hell need to see a business plan. Being social and making connections has very little to do with commercial success. It may seem that way, but I've seen more companies shit tank with people like this at the helm than you'd probably believe.

6/13/2008 8:54:23 PM

He should be able to get a hardship and defer the student loans for a period of time.

Its usually a bad sign when people say "if they only had X, things would get better." That is usually a bad mindset and not one of thinking he can work his way out of his problems. He is bargaining and not accepted his situation in his mind. He is probably dealing with some depression issues too.

I dont know why a bank wouldnt loan him some money. There might be something he isnt telling you.

I think you show alot of character though to be considering this. My hats off to you sir.

6/13/2008 10:30:31 PM

The banks may not think he is super risky, it is just hard to get a 100% loan from a bank for a startup. The bank wants to see some of your own money tied up. That way if you fail there is hopefully more assets to liquidate than if you did not invest any personal funds, also they think if you have a chunk of your own money tied up in a business then you will fight like hell to keep it afloat.

Do you know if he has looked in to SBA backed loans? The SBA will look over his business plan and insure the loan (allowing him to borrow more) if it looks solid.

6/13/2008 10:34:52 PM

I checked out his business plan a couple weeks ago when he was deciding to go solo. Its pretty solid. I'm not an expert on business plans, but it compared pretty well to one I got from a speaker in my "Practicing Law as a Business" class. This guy isn't dumb.

6/13/2008 11:03:25 PM

It sounds to me like you have made up your mind.

6/13/2008 11:28:15 PM

I can only laugh at people with all this money saving while the dollar skydives.

6/13/2008 11:55:59 PM

^great point. 0 today is still 0 in ten years, sure fire way to protect yourself against a declining dollar is NOT to save. I hear putting your money in automobiles is a great investment too. You can laugh at them all you want, but unless your attitude changes, they will be paying for your retirement.

6/14/2008 12:24:17 AM

set em up

6/14/2008 12:32:22 AM