Why Lending Money to a Friend is NEVER a Good Idea

[Spiffster]

I wanted to share this with the community in hopes that others can avoid the same experience. A now former friend of mine owns a body shop, a particularly successful and high end body shop. I have known this guy for 15+ years and after high school we became really good friends. During my single years we would hang out at least three times a week. He seemed like the perfect friend and I had zero reasons not to trust the guy 100%. So when he presented me with an investment opportunity where I could make 20% back on my cash "within three months" against my better judgement I jumped at the opportunity. The money was put towards rebuilding a classic Porsche that already had a buyer... It was a sure thing, for him, not so much me.

Anyway, It took a YEAR to complete the rebuild, and all along the way, I was given every excuse in the book as to why things were behind schedule... at the time it was of little concern to me, as I expected delays and a return of 20% over the course of a year is still really good. Long story short the Porsche sold for $350K but I didnt get my investment of $50K back until earlier this year (three and a half years after the check was written) The shop made over $200K in profit on this deal alone... But at this point I am owed my $10K share of which its pretty obvious I will not see.

Sure, $10K is a lot of money, and I should consider myself lucky to have gotten back my initial investment, but that money was pulled from an investment account that has since more than doubled. From that point of view, I am out at least $50K that I absolutely would have had by this point if I had either not lent the money or had gotten it back when promised... this is not even the part that bugs me the most... after this guy paid me back my initial investment (around a month ago), he has since completely broken contact with me, wont return calls, texts, etc. AND NOT ONLY THAT, we have a few mutual friends (a few of which I introduced him to) that have since also stopped talking to me at the same time. I can only assume he said something to these people, and I honestly have no idea what that could be, but they have avoided me completely over the last month or so. This is very out of character for these people, but I have not asked them why at this point, rather I have just carried on as normal. I have other groups of friends and I am busy enough as it is, so I dont feel the need to create any drama.

To me, friends are priceless, and if this guy was in financial trouble I would only expect him to pay me back when he could, but the situation is very, VERY, much the opposite. I sensed a troubling reluctance to fulfill his side of the agreement early on, but was never pushy about getting my money back. Heck, I waited this long and I was certainly not hurting for the cash.

Unfortunately I feel that I have no legal recourse to get my promised $10K as all I have are a few signed papers outlining the agreement... and we are really not talking about official documents that have been notarized or anything like that, because In my mind, the agreement we had was based on mutual trust, he insisted on producing a written agreement. For me this seemed unnecessary.

Moral of the story, never put yourself in a similar situation, you could lose good friends.

I am interested to see if someone else has experienced a similar situation. Any advice is also appreciated.

[disneysteve]

I totally agree that you shouldn't lend money to friends, but that isn't really what happened here.

You allowed a friend to sucker you into a too-good-to-be-true "investment opportunity". It sounds like you knew this was a bad idea but did it anyway. Maybe you got a little blinded by the possibility of making 10K in 90 days even though deep down you knew that probably would never happen.

I think you should be incredibly grateful that you didn't lose the whole 50K. It's really a shame that a business deal gone bad destroyed a friendship, or multiple friendships, but that's often how it works unfortunately.

So I'd modify your title. Yes, you should never lend money to friends but you should also never go into business with friends. The likelihood of it ending badly is extremely high, as you learned the hard way.

You need to decide up front if the possibility of making money is more important than keeping the friendship because the odds are high that if things don't go well, you'll lose both money and the friendship.

[rennigade]

Pigs get fat...hogs get slaughtered.

You were greedy and thought you were going to make out like a bandit (dont take that the wrong way, its hard for anyone to pass up some opportunites that promise big returns...example all the investors that gave money to bernard madoff.) Bad idea. Like steve said, you were lucky to get the $50k back. Most people never see a penny.

Also...this person you gave money to...they arent your friend and they probably never were. Friends dont do stuff like that. There are many layers to people. On the top level he was your "foe friend." Maybe even a couple layers deep. But the deeper you travel through this person...the darker it gets. He took your money knowing he was going to punk you. The core of this person is dark...you're probably lucky to have this fellow out of your life.

[snafu]

It seems so many of us need to learn this lesson via personal experience. It happens to other folks, won't happen to me seems the philosophy. We who have been burned agree 100%. I'm delighted you got back your original investment, most of us lose it all.. money, trust, friend, relationship.

[disneysteve]

this person you gave money to...they arent your friend

Sad but true. A real friend wouldn't have done this to you. Had the deal tanked and you both lost your money, that would have been one thing, but it sounds like he made out just fine and earned what he needed to in order to pay you as promised. The fact that he chose not to says a lot about him.

[richard johnson]

I’ve seen my fair share of friendships end due to the lending of money. It might not sound like a big problem, but it does get frustrating when you don’t get the money back when you need it.

[Spiffster]

Thanks for the feedback... I can always find sound advice here. Im gonna chalk this one up as a learning experience that could have ended a lot worse than it did.

[Fishindude77]

Just consider it a lesson learned and be thankful you got your money back.

I probably wouldn't completely burn the relationship bridge over this, just wouldn't do any future deals with this particular individual involving money.


To say you should never lend money to or go into business with friends is pretty limiting. Many successful deals and partnerships have started this way. The trick is having everyone on the same page up front, with a clear plan and expectations, and regular follow up and updates.