Neither a Borrower or A Lender Be....

or says Hamlet

From Shakespeare's Hamlet, 1603:
LORD POLONIUS: Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.

This past weekend, I was a lender. With an explanation. Here is the tale.

I had my friend Adam call up a couple weeks ago and ask if he could crash on my couch for a couple nights, he was working in the area on a project, needed to be local, could not get a hotel reservation, and this would give us a chance to catch up. I said yes, come on by, you are welcome to stay, I've got some stuff going on, but we can catch up over dinner. Friday afternoon I called and left a message on his cell phone stating I was going to leave the office shortly, run by the grocery store-did he need anything. I get a call back about an hour later.

Adam: Hi-finished early today, got here, got settled, got your message.
BB: Great! I've got a dinner reservation at The Bar for 6:15 PM, we can grab a quick bite to eat.
Adam: The Bar sounds fine to me.
BB: Do you need anything from the grocery store?
Adam: Wellll, no, but ah, two of my clients have not paid me yet, can you lend me $200 until the trade show in 10 days?
BB: Four beats of silence-then "OK, but I'm not going by the bank until sometime on Saturday, it's not on my way home and I don't have that much cash in my wallet, can you wait?
Adam: Yes and thanks. Noticeable relief in his voice. Noticeable.

I lent Adam the money because a couple years ago when I switched jobs there was a delay with payroll processing and then another delay when my paycheck was mailed to me instead of being direct deposited. Our accounting office is not local to my current job. He kindly fronted me a bit more than $200 until all my checks came in and things got sorted. I paid him back once the dust settled. I know his business, I know his clients who are late payers, I know Adam will pay me back. (fingers crossed).

What disturbed me about lending the money was the following. Adam and I sat over dinner and talked about his business (he works as a "consultant" as well). He stated that due to the economy, his yearly income is down by at least 1/3rd if not almost 1/2 of what it was the year before. Plus he has several clients, habitual late payers, that are even paying later. He's had to be more creative with his travel, temporary employees, expenditures and finances. Adam told me he was paid and up to date on all his bills, nothing in arrears, but very little if anything left over for this month. (Hence the temporary loan from me). I have also done some freelance work for Adam, one time working on site at a clients office gathering information. The client was in an ultra chatty mood and told me that while he liked Adam as a person and his work was acceptable, he was having an issue with some of the incidental expenses that got tacked on to almost all of Adam's projects. I cheerfully replied, I'm just the gatherer of information, I don't handle the billing! I've heard this before. Adam does good work, but the incidental expenses at times seemed high.

Adam and I went to dinner and Adam decided to have three glasses of wine at $8.25 a pop, a fairly pricey meat dish, plus an appetizer and dessert. I had soup, a burger, and two beers. My meal cost was $22 including tax and tip-give or take a buck or two, Adam's was $60 excluding tax and tip. How do I know this? Adam grabbed the check and said "The meal is on me", but forgot to pick up the receipt. I picked it up and dropped it in my bag to bring it back to the house. The next night, a similar situation. I call some mutual friends and the four of us go out for Mexican food. I'm not feeling all that flush with cash (budget, just doing a temporary loan) or hungry, so I order an appetizer, eat more than my fair share of chips and salsa and am willing to pay my fair share of the margarita's. Adam has several Margarita's, an appetizer and a main course.

The conversation turns to our jobs and expenses. Adam again says he's having a cash flow problem with a couple clients. He again grabs the check, takes cash from the others in the party and puts the meal on his AmEx. Because he is on a business trip, we discussed business, this is a business expense and he will bill his clients.

IF Adam is having a such a cash flow problem, WILL he be able to pay his AmEx when the bill comes due? I have no idea. I did make Adam give me a check for the $200 that I will deposit to my account no later than the day before the trade show he will be attending. That was the stipulation for me forking over the cash. I made it very clear and asked that the check be dated accordingly. I'm not just going to fork over the cash without a little collateral.

At first I really thought Adam was joking about the temporary loan. After our dinner conversation on Friday, I realized he was not. I also saw all those warning signs-paying for things with his credit card, taking cash from others (sounds like he has no cash of his own). He told me he has had to pre-bill several clients for work not yet completed (even his good payers) on two current projects and the upcoming trade show expenses were almost 1/3rd more this year than last. As I listened to the conversation, I could also hear that while a lot of lip service was paid to "cutting expenses" due to "decreased income" that in all likely hood, I really wondered if that was the case. What I saw was a lack of good money management on Adams part and an unwillingness to really cut his expenses (how about a burger instead of a steak?)

Oh well. I made the loan as a payback for a kindness done for me. Let's just hope Adams check doesn't bounce between my bank and his. I'll let you know what happens with that in two weeks.