Awkward situation with DB

[EvaHoffman]

My brother is setting up a business and asked to borrow money to buy a van. I have just got a tax rebate so I offered to lend it to him.

I told a friend and she says I really need a written agreement about repayment. I sort of agree especially as he can be flaky and I'm not rich.

I am sure he'll be offended though and it feels weird to be so formal with a family member. How do I word it to sound friendly and neutral but assertive?

He can get a small business loan from the government. I wouldn't get involved.

Thanks for your reply. I've already agreed to lend the money though and he needs it really soon.

I just want to know how to present him with the document. I am worried I will either come across as too formal and intense or on the other hand apologise too much. How shall I word it?

Don't worry about his feelings, this is a business transaction.
Keep your emotions out of it. If he doesn’t want to sign tell him to go to a bank.
Be sure that any written agreement has a date, the amount and a time frame for repayment.
Both sign and both keep a copy.

Mmmm. I would not do this.

Can you have a slightly panic-stricken phonecall where you realise that you have some big bill? Car making funny noise?

Let him get a business loan.

He needs it really soon? Um, that's his problem-?

There's no point having a document if it's not legal. In which case you need a solicitors input.

A personally-written document will only be useful as supporting evidence of the terms of the loan if you're willing to take him to court for non-repayment. Are you?

Don't ever agree to lend money you aren't prepared to lose

@EvaHoffman

Thanks for your reply. I've already agreed to lend the money though and he needs it really soon.

Tell him you are not going to be able to. Your thread title seems it 'awkward' Don't do it

I'd lend him the money and say something along the lines of "should we agree a timescale for repayment ? Would paying back monthly be a good idea ,say X amount at the end of the month ? "

good luck OP ,you sound like a lovely sister .

'Flaky' rings alarm bells. If he hasn't already come up with a plan himself to pay you back then don't do it, op. It's miserable constantly asking for money back and it can affect your relationship.

I imagine if it was me, I’d hand it to my bit other and say ‘right so when will I get this back’ to which it should start the discussion on how.
Then you can plan it properly then.

If you're describing him as "flaky" and anticipating that he will react badly to a formal loan agreement then you are admitting that you know this is highly likely to go wrong. Additionally, a very high percentage of new businesses fail, so even if his character is rock solid then there is already a very high level of risk around his ability to repay.

If you do sign an agreement then you'll need to be prepared to take him to small claims if he fails to pay - can you see yourself doing that?

I agree with PP - fake an "emergency", something expensive that is needed urgently so you can no longer lend him the money.

Thanks for all your replies.

We had already agreed the repayment terms and final date verbally and by email though it was a bit casual eg. 'Can you pay it back by x ?' 'Ok yes' I just wanted to back it up with a formal 'loan agreement'

The awkwardness about the situation stems from presenting him with a formal written loan agreement after having agreed it all verbally beforehand. He won't have expected it.

Anyway. I have emailed it to him now. I think the email is friendly and sounds reasonable and assertive. I await response.

The thing is you can have a formal written agreement, But what are you going to do if he reneged on the terms and didn't repay you on time? Force him to sell the van? Take him to small claims court? I wouldn't lend a relative money I couldn't afford to write off

As it's for his business I would say he can then show through his accounts etc and any interest you charge is a business cost!!!

So you're doing it for his benefit really

I agree it's probably a risky thing to do, but I've done it now.

Yes I know that the written agreement isn't a guarantee but it's better than not doing it. For one thing the dates and amounts are really clear and unambiguous so he can't claim he didn't say it or that I misremembered a detail. It also signals that I'm not a pushover.

Hmmm well too late...

OP, I think the trouble is that your tone and uncertainty here shows everyone as clear as day that you are a bit of a pushover. And your brother will know it. (that's why he's asked you, and has used 'Oh no sis I need it really soon!' as a bit of emotional blackmail...) And he's a flake.

Not a great combination.

If you do get it back I imagine a fair bit of irritation and guilt tripping is going to have to be withstood.

If you're paying for the van in effect, could you have the registration document put in your name, and agree to transfer it to his name on completion of the repayments? The van will depreciate of course but at least you'd have something if he didn't pay up.

Agree not to do it. Lending money to family often causes huge problems.