Lenders
- Is this a real business loan or a personal loan for a business? Am I putting my trust in the financials or in the friend? (Your comfort with risk may vary depending on your answer.)
- Does this loan or business fit with my values? Is it something I’d like to see in the community?
- What level of risk is comfortable for me? Should I charge higher interest for riskier loans? Or do I want to avoid them altogether?
- Do I want steady return or a balloon payment? Do I want interest or goods/services? Do I want repayment to start right away, months from now, a year from now?
- What is a reasonable interest rate to charge? What are reasonable terms for a loan like this?
- Do I want to ask for collateral?
- What other loans does the borrower have out?
- Are business licenses, bonds and tax filings up to date?
- Have I seen a profit & loss sheet, a balance sheet, and a cash-flow projection for this loan? Do they seem solid? Are Accounts Receivable up to date?
- Have I asked for references and a credit score (available free for the borrower)?
- Have I looked closely at the business plan? Does it discuss potential customer base, competition, pricing, marketing, and issues with labor or the supply chain?
- Will the loan enable the borrower to make (or save) enough to pay it back?
- Do I want to be protected by a disability or life-insurance policy that covers the borrower over the term of my loan?
- How much do I want to be involved as a mentor?
- What happens if the borrower cannot make his payments? Have you made a provision for renegotiation of terms when needed?
- How does this loan fit into my loan portfolio?
- Have I read the Idiot’s Guide to Person-to-Person Lending?
Borrowers
- Do I know where to go for help with providing the financials a lender will want to see? (see the WILL Resource sheet for suggestions.)
- Do I know my credit score? Can I account for why it is what it is?
- Have I identified my market and assessed my competition?
- Have I priced my product or service right?
- Will sales come in a timely enough matter to cover costs (cash flow)?
- Will the loan enable me to make or save enough to pay off the loan in a timely fashion?
- What sort of loan repayment schedule can I reasonably afford? Does it fit with seasonal ups and downs in my business?
- Am I willing to offer collateral for the loan?
- Have I asked for enough? What kind of cushion do I have in money, labor, and supply?
- Are my business licenses, bonds, and tax filings up to date?
- Do I want the lender to also act as a mentor?
- What happens if I miss a payment (or two or three)? Can we renegotiate terms?
- Do I have contingency plans to pay back the loan if I fall sick or die?
- Have I provided business references (not friends or family)?