What Do You Do When a Friend Asks You for Money?

“My best friend is the man who in wishing me well wishes it for my sake.” – Aristotle (Nicomachean Ethics, fourth century B.C.)

They say you shouldn’t mix business with either friendship or family. And they may be right. But I’ve done a lot of both and have mostly good things to say about it.

I’ve advocated nepotism in the past. And I don’t mind telling you that some of my best friends are work friends. And so, generally, I’m in favor of hiring friends and family – so long as both are willing to respect
the business arrangement and drop the business relationship if things get messy. Because family and friendship are always more important.

There are times when a non-business friendship suddenly becomes business-like. The most common situation happens when he needs money and knows (or believes) that you have it. From his point of view, what could be easier: “Ask him. He’s got plenty. It’s not doing him any good anyway – sitting around in a bank account or disappearing in a mutual fund.”

I’m happy to say that very few of my family members and friends have asked me for money. If I know they need it, they know I’ll make an offer. If I don’t, they assume I don’t want to and that’s OK with them. For them – as for me – the personal relationship is paramount.

But there have been exceptions. There have been times when a friend asked for a loan or asked me to buy a product/service or invest in a project. Most of the time, I agreed — and in almost every case, it turned out badly.

This may happen to you one day. (Yes, you should be so lucky.) And if it does, I’d like to think that you would be better prepared to handle it than I was.

I’ve been thinking about some of the money I’ve lost this way. (I’d be embarrassed to tell you how much it was – several nice homes, for sure.)And I’ve been wondering what I could have done or said to have avoided it.

It’s not easy to say “no.” Anyone who feels comfortable putting you in such an awkward position might very well be manipulative enough to structure the request in such a way that you are hard put to refuse. He very well might, for example, ingratiate himself to you until you are warm and fuzzy and then spring the request on you when you are least prepared to do something about it. In such a situation, no amount of subtlety will work. You’ll need a hard and cold (but dignified) way to say “no.”

I’ve been thinking about what that technique could be, because I have a strong feeling that the husband of an old friend is about to suggest that I use him as a broker for my next real-estate purchase. It won’t be enough to say, “Gee, Sam, I’d be happy to do that, but I already have a broker I work with.” Because he’ll say something like, “But he’s not your friend. I am.”

I’d then have to explain that I rely on this guy to scout deals for me. If I don’t give him the “comishes,” he’s going to stop looking.

“That’s not a problem,” Sam will say to me. “I can find you all the good deals you need.”

Then I’ll have to say something like, “Well, maybe you will, Sam. But what would I say to this guy?”

You can see how sticky it can get.

I’ve been rehearsing this unpleasant and seemingly useless conversation for several months now, always changing my wording but never coming up with something that will resolve the problem. Then, yesterday, it came to me. When Sam approaches me, I’m going to say this: “Sam. I have a rule. I don’t mix business and friendship. (This part will be a lie, but you already know that I’m a big advocate of lying.) “That means you have to make a decision. Do you want to do business with me … or continue to be my friend?”

Chances are, he will be embarrassed by the question and will “choose” friendship. This will accomplish two important things:

1. I won’t have to tell him that I don’t think he’s a very good real-estate broker.

2. Sam will finally have a solution to the moral dilemma that’s been eating away at him as long as it’s been eating away at me: “How can I live with myself if I don’t take advantage of my relationship with MMF?”

If Sam considers my alternative and comes back with an honest answer (“I’d much rather do business with you, MMF. I’ve never really liked you anyway. I just like the fact that you are successful.”), I can then thank him for his integrity and deal with him as a business acquaintance. As such, I can tell him very directly, “Sam, I don’t want another broker. I’m loyal to the guy I’m working with now and have no interest in making any changes. If you have a good deal, feel free to bring it to me. You’ll get nothing extra from me, but I’m sure you won’t mind because — you understand — business is business.”

I’m so pleased with this little solution that it’s changed my feelings about our anticipated meeting entirely. I’m actually looking forward to it.