Lending Before WeFinance

Should you lend money to friends, family, or co-workers? WeFinance makes the process of lending money easy, safe, and convenient.

Looking to borrow or lend money with people you know? WeFinance is a platform that manages the legally binding contract for the loan and automatically collects payments (helping you avoid awkward conversations!).

Lending between parties isn’t a new concept. It’s been around since 2000 BC when farmers and traders loaned each other grain. Borrowing from real people is a way to get funds if you run into an unexpected expenses or if you decide to do something like a coding bootcamp that typically costs between $15,000 to $20,000.

At the end of the day, the main question is whether you trust them to repay you the amount you agreed upon. We spoke with five people about their experience lending money without a platform like WeFinance. Often, they’re lending to employees or friends/family but sometimes they’re lending to strangers.

How could WeFinance have made the process easier?

AJ Saleem the owner of Suprex Learning, talks about how he has an unofficial program to loan money to his employees to help with their student loans. His motivation was to help people avoid paying outrageous interest rates.

I started lending money to my employees after I had finished paying off my student loans when I realized I had paid an interest rate of 15% after you included all the fees! That endless cycle of more and more interest had disheartened me. I did not want the same to happen to my employees.

I did not have a fear of my employees not repaying me since I did not offer huge loans. Most were just monthly advances and I limited it to once a year. I trusted these people and I often understood why they needed help.

In the future, I would improve the process by having a formal contract.

How could WeFinance have helped AJ lend to his employees?

WeFinance automatically creates binding contracts between lenders and borrowers, so this could have helped AJ ratify that a loan existed. The benefit to this is that it limits the risk of an employee not paying him back. Since WeFinance manages the collections, he wouldn’t need to nag his employees about repayment.

Han Chang, the co-founder of InvestmentZen talks about lending $3,000 to his (now) mother-in-law, Tina.

My then-girlfriend (now wife) frequently invited me to have dinner with them so I had already gotten to know her quite well and saw firsthand that she was extremely responsible financially and was even experienced in stock trading which is a rarity in China. What made the experience positive was the respect from both sides and just how much trust there was. I was promptly paid back in full three months later and never had a concern the entire time.

I’m not sure what can improve the process of lending to friends/family except to really understand the borrower’s personality and financial situation. In this case I knew there would be no problems and didn’t need the money, so it was a smooth ride.

How could WeFinance have helped Han lend to his mother-in-law?

Trust is important, and there was clearly a lot of trust in the arrangement Han had. Given the potentially risky nature of stock trading, it might have been beneficial to have a contract in place. Even if he never really intended to use it (given the relationships and how it might cause strain) it’s usually better to have agreements, especially with money, in paper.

Richard Hayman, a minority partner of Vianse Enterprises, talks about how lending money to his employees reduces issues like employee theft.

As the owner of a small company of 80 employees I set a company policy that we would never provide advances on pay. However, I would personally lend money to any employee who asked. Having an urgent need for cash hurts employee productivity and tempts employees to steal.

Over 25 years, my loans ranged from $200 to $3,000. Some employees borrowed more than once. Of course, failing to repay the loan would mean there was no way to borrow more or again. The employee set the repayment schedule and could extend it if necessary. No interest was ever charged.

How could WeFinance have helped Richard lend to his employees?

WeFinance let’s borrowers set their own repayment schedules (interest rate, length, and deferrals). Given that this was a company of 80 people, Richard might have been able to save valuable time dealing with contracts and collections if he used WeFinance. The platform would allow people to pick their own interest rate and range, so his loans (that ranged from $200 to $3,000 with no interest) could easily have been processed through WeFinance.

Jesse Harrison, CEO of Zeus Legal Loans, mentions how he lent money to his neighbor for school tuition.

He was a shy guy who admitted to me that he got nervous around people. When I tried to shake his hand, it was wet. He explained to me when he gets nervous, his hands get sweaty. He appeared embarrassed. I figured anyone who is sincere enough to admit their weaknesses which they find embarrassing, and anyone who is so self-conscious about their character that they would get sweaty would not disappear with my money.

The positive was that I knew I was helping someone further his education. I never had a fear because he called me every day assuring me that he was paying me back, without me ever asking him to call. The phone calls actually started getting annoying!

To improve the process of lending to friends/family/coworkers, I suggest having a formal contract and setting a fair interest rate and late fees. This way, the process seems more formal to the borrower, and they are less likely to default. Payment arrangements are also good to be introduced in the contract. People find it easier to pay off a debt in smaller, gradual amounts instead of one lump sum.

How could WeFinance have helped Jesse lend to his neighbor?

Jesse already touches on a couple of points where WeFinance could have been helpful like a formal contract and how payments are processed automatically every month. Another feature that WeFinance provides is the ability for borrowers to send lenders updates. Instead of having calls every day, he could have received email updates (which he could opt out of if he wanted to).

Jill Ferguson, the founder of Women’s Wellness Weekends, talks about lending money to a stranger she met.

In 2011, I was in Quebec in an art gallery talking to a 20-something employee named Caroline Boucher. We discussed the pieces in the store and about 30 minutes into our time together I learned that she was a college graduate who studied to be a jewelry designer. More talking ensued and maybe an hour later we left the store with gifts we bought for friends. As we started to walk away, I got an idea to offer Caroline a loan to start her own design business (she mentioned that she wasn’t currently designing because materials and start up costs were expensive so she was saving).

The next morning, we returned to the store, asked to speak to her on her break and offered to loan her $5,000 with the terms of no interest, payable over 5 years. She cried and couldn’t believe new friends could offer what no one else was able to offer her. This money allowed her to set up her own studio and work as a jewelry designer until she decided in 2014 that it wasn’t what she wanted to do with her life. She paid the money back in full in that year. She and I have kept in correspondence almost monthly ever since.

I believe that loaning money to family, friends, or co-workers can be fine as long as everyone is bound to a contract and that it is understood as a business transaction (not a personal one) and treated as such.

How could WeFinance have helped Jill lend to Caroline?

Since Jill was lending to a stranger, the crowdfunding aspect might have been helpful. WeFinance let’s people create a campaign to get endorsements and pledges from people who know them personally. Jill would be able to see that Caroline’s friends and family have faith in her ability as a jewelry designer, even if they weren’t personally able to lend to her.