Lending money to family

[BrilloPad]

Always awkward with family. I'm down about £20k built up over a few years helping my parents out and stopping their house getting repo'ed.

Didn't work in the end, and I'll likely never get that money back now. In hindsight it would have been kinder to let things take their natural course.

But its different with parents though? Shame it did not work - but it must have given them a few more months/years?

Having said that I would never ever let my kids bail me out.

[the_rangdo]

But its different with parents though? Shame it did not work - but it must have given them a few more months/years?

Having said that I would never ever let my kids bail me out.

It did give them more time - to get even more in debt, and his house being repo'ed in a depressed market lost him bucket-loads too.

I don't really dwell on it though, what's done is done.

[geoff from contracta IOM]

Perhaps you are looking at this the wrong way ? Is the business sound but just undercapitalised ? You can't squeeze what isn't there and if the businees folds because you are demanding re-payment with funds that aren't there you will likely never see your money they will just liquidate it.
If the business is good and you trust the abilities of the people running it but needs more working capital convert your loan into shares and if necessary inject more money.
What could you add to the business to make it even more profitable for all the shareholders ?

Feel free to disregard my suggestion but think about the problem the way a businessman would not the way a family member who has lent another family member money would, with a different perspective you may just see your money back.

[BrilloPad]

Perhaps you are looking at this the wrong way ? Is the business sound but just undercapitalised ? You can't squeeze what isn't there and if the businees folds because you are demanding re-payment with funds that aren't there you will likely never see your money they will just liquidate it.
If the business is good and you trust the abilities of the people running it but needs more working capital convert your loan into shares and if necessary inject more money.
What could you add to the business to make it even more profitable for all the shareholders ?

Feel free to disregard my suggestion but think about the problem the way a businessman would not the way a family member who has lent another family member money would, with a different perspective you may just see your money back.

Very good suggestion - but of course it depends on how profitable the business will become. It also means tying yourself into people you want to see the back off. And of course you get further down the list of creditiors if it does all go t1ts up (but you will probably get zero either way).

[NickNick]

I've made a big boo-boo! Bailed some family out as their business was struggling (business loan, reasonable amount) after they where broken in to and the unit savaged. This was back in March and the promise was that it would be repaid by end of March.

Now we're in May, and the money is still not forthcoming. They have a customer that owes them big time (£30k+) which I've confirmed as I've seen the books. This outstanding monies has now pushed me to force them to them to withhold stock of the customer (Family are a haulage storage firm) which they have done.

The question is, what do i do now. I want my money back, and quick. Im losing confidence that they are capable of repaying. Do i start recovery proceedings? the contract I made them sign, to keep it all official etc, states i can recover the costs in any way I can. I'm tempted to take a vehicle or two to make sure the money is repaid, the "boys" can sort it...

To be fair Im past caring that they are family, I can deal with the fallout. They need to be reassuring me ASAP that I will get my money...

Suggestions?

Can you not exchange the loan for a share of the company and get the money over time as opposed to forcing the issue now and potentially getting nothing? Sounds like they have the capital in teh business to run it but are going through a cash flow problem that some management consultancy might help sort?

Whatever you choose to do it's a tricky situation to be in that's for sure.

[Platypus]

I think I would assist the company in trying to get their £30k back, if I could. Force them to issue a winding up order on this creditor.

You're right to be playing hardball now. If they go bankrupt, I expect you'll lose your money. You'll need to repo something before it gets to that stage.

I've heard so many stories over the years where loans to friends and family go wrong, I'll never do it myself, no matter what. Luckily all my friends and family know that I've got no (substantial amount of) money!

[BlasterBates]

Small business survival rate is poor.

Bureau Of The Census Small Business Survival Rates | SmallBusinessNewz

Never lend to a small business. Within 5 years half of them will have gone under.

[geoff from contracta IOM]

Small business survival rate is poor.

Bureau Of The Census Small Business Survival Rates | SmallBusinessNewz

Never lend to a small business. Within 5 years half of them will have gone under.

And some of them become Apple

[BlasterBates]

Right, but it's a loan isn't it, not equity, it doesn't matter whether the company goes stellar or whether it scrapes through you get your loan repaid.

...and be honest how many small startups do you need to invest in to get an apple?

100,000 a 1,000,000

Your chances are probably akin to buying a lottery ticket.

[geoff from contracta IOM]

Right, but it's a loan isn't it, not equity, it doesn't matter whether the company goes stellar or whether it scrapes through you get your loan repaid.

...and be honest how many small startups do you need to invest in to get an apple?

100,000 a 1,000,000

Your chances are probably akin to buying a lottery ticket.

I think if people don't have the acumen to tell the good from the bad they should stick with their building society