How to lend huge amount to a friend?

[Chand P.]

Hi,

This is my first post here and please be easy on me.

One of my friend need money for his business activity and none of the professional bankers won't lend him money due to his tax filing situation, loan to debt ratio etcetera.

I received a request from him for a 24 month loan of 200K at 18% interest rate per year (only interest payable every month and loan will be paid off at the end of 24 month term).

He does have a primary residence on which he is having around 300K equity and he is having a primary mortgage on that property.

Is there a way that I can be secondary lienholder on that property which is in the state of Texas by lending him 200K?

I know this person for the past 20 years and I can trust his ability to pay me back but like to draft some thing legal since the amount involved in the transaction is not something that I can afford to loose.

Please let me know your thoughts around this. Thanks in advance.

[Steve Babiak]

Many years ago a business owner approached my mother looking to borrow. So mom asked around a bit; the guy needed money because the business was in trouble. That is why lenders wouldn't give him a loan. Troubled businesses don't always get out of trouble just because somebody threw a pile of money into the business; that money only delays the eventual day of reckoning. 

If you do decide to make this loan, be sure you can see the financials of the business before, and during, the period of the loan.