Coax a Friend Back From Disaster
March 22, 2015 6:27 PM Subscribe
My friend is embarking on a potentially disastrous business idea. Should I try to dissuade him? How do I do that tactfully, without sabotaging our relationship?
My friend, Rabbit, has a business idea that will require him to take out a seven-figure loan in order to buy some property. Rabbit doesn't have much money to put down (or much money at all, really), so banks have not offered him a good interest rate.
A mutual acquaintence of ours, Snake, has offered to co-sign the loan in order to drive the interest rate down -- but in exchange for 33% of the the business. I believe that Snake -- consistent with her behavior in the past -- is being a little predatory here. She's getting free equity for almost nothing, especially since this would be a secured loan.
However, even with the lower interest rate, the mortage payments + insurance + taxes on the loan come close to $100K. Rabbit's business idea doesn't have a realistic chance of producing that much per year.
Now, I'm somewhat educated in finance, and the numbers behind this proposal make me a little nauseous. I'm quite worried about Rabbit's future.
My questions:
1) Do I have the right to intervene here? The duty?
2) If I do intervene, how do I do that without sabotaging our friendship, or coming off as meddlesome?
3) What about Snake? Should I have a conversation with her?
I'd appreciate your input a lot. Thanks MeFites.
My friend, Rabbit, has a business idea that will require him to take out a seven-figure loan in order to buy some property. Rabbit doesn't have much money to put down (or much money at all, really), so banks have not offered him a good interest rate.
A mutual acquaintence of ours, Snake, has offered to co-sign the loan in order to drive the interest rate down -- but in exchange for 33% of the the business. I believe that Snake -- consistent with her behavior in the past -- is being a little predatory here. She's getting free equity for almost nothing, especially since this would be a secured loan.
However, even with the lower interest rate, the mortage payments + insurance + taxes on the loan come close to $100K. Rabbit's business idea doesn't have a realistic chance of producing that much per year.
Now, I'm somewhat educated in finance, and the numbers behind this proposal make me a little nauseous. I'm quite worried about Rabbit's future.
My questions:
1) Do I have the right to intervene here? The duty?
2) If I do intervene, how do I do that without sabotaging our friendship, or coming off as meddlesome?
3) What about Snake? Should I have a conversation with her?
I'd appreciate your input a lot. Thanks MeFites.
Response by poster: Hey thanks for clarifying about Snake. I'm definintely, definitely biased against her so I jumped to some conclusions. It would be hard for me speak to her in a considerate way, but in this case it may be worth the effort - maybe I need to talk to Rabbit and Snake together.
posted by seinwave at 6:59 PM on March 22, 2015 [1 favorite]
posted by seinwave at 6:59 PM on March 22, 2015 [1 favorite]
Here's your script:
"If your business idea requires a seven-figure personal loan, it's a bad business idea. You can open a string of Pizza Hut franchises for less than that."
posted by Cool Papa Bell at 7:02 PM on March 22, 2015 [25 favorites]
"If your business idea requires a seven-figure personal loan, it's a bad business idea. You can open a string of Pizza Hut franchises for less than that."
posted by Cool Papa Bell at 7:02 PM on March 22, 2015 [25 favorites]
If you have the sort of friendship where directness is valued and appreciated, by all means go that route. "I have concerns about this and I'm worried about how this is going to go." If Rabbit's hackles are raised as a result, however, you need to be willing to let it go and mind your own business, so to speak. Focus on the friendship and avoid this topic.
If directness won't work, my first response would be to sit down and ask Rabbit to explain all the details to me. I'd be careful to phrase it as, "You know your awesome business plan? I'm really curious about how you're doing to do X. I don't think I understand how it will work. Can we meet for coffee and talk about it?" The key here is to sound curious - not accusatory or like you're meddling.
It's possible that you'll sit down and Rabbit will explain all the details in a way that makes perfect sense - and you'll find that you somehow missed part of the picture. Then you walk away feeling relieved.
You could also point out to Rabbit that you're skilled in financial things and that you're willing to offer your services in (for example) figuring out budgets and risks and whatnot. If he's interested, you've got a perfect "in" to explain your concerns (after, again, hearing all the details from Rabbit).
The other possibility, of course, is that you ask some gentle questions and Rabbit sees for himself that this might not be the best plan. Same method, though, as above. Gentle questions. Nothing accusatory. Nothing that makes Rabbit feel defensive or stupid. Just questions like, "Okay, help me with the math. If you've got X and Snake has Y, does that mean Z happens? What about [other things]?"
If Snake is only an acquaintance, and not a friend, I wouldn't bother talking to her. I also wouldn't invite her to sit down with you and Rabbit together. Your concern is for Rabbit and the last thing you want is to create some sort of weird triangle.
posted by VioletU at 7:03 PM on March 22, 2015 [1 favorite]
If directness won't work, my first response would be to sit down and ask Rabbit to explain all the details to me. I'd be careful to phrase it as, "You know your awesome business plan? I'm really curious about how you're doing to do X. I don't think I understand how it will work. Can we meet for coffee and talk about it?" The key here is to sound curious - not accusatory or like you're meddling.
It's possible that you'll sit down and Rabbit will explain all the details in a way that makes perfect sense - and you'll find that you somehow missed part of the picture. Then you walk away feeling relieved.
You could also point out to Rabbit that you're skilled in financial things and that you're willing to offer your services in (for example) figuring out budgets and risks and whatnot. If he's interested, you've got a perfect "in" to explain your concerns (after, again, hearing all the details from Rabbit).
The other possibility, of course, is that you ask some gentle questions and Rabbit sees for himself that this might not be the best plan. Same method, though, as above. Gentle questions. Nothing accusatory. Nothing that makes Rabbit feel defensive or stupid. Just questions like, "Okay, help me with the math. If you've got X and Snake has Y, does that mean Z happens? What about [other things]?"
If Snake is only an acquaintance, and not a friend, I wouldn't bother talking to her. I also wouldn't invite her to sit down with you and Rabbit together. Your concern is for Rabbit and the last thing you want is to create some sort of weird triangle.
posted by VioletU at 7:03 PM on March 22, 2015 [1 favorite]
Isn't this what bankruptcy is for?
Rabbit and Snake take a risk - if it fails, their credit is gone and they file bankruptcy.
Not your business. You can offer to help run numbers, or stay out of it.
posted by jbenben at 7:23 PM on March 22, 2015 [4 favorites]
Rabbit and Snake take a risk - if it fails, their credit is gone and they file bankruptcy.
Not your business. You can offer to help run numbers, or stay out of it.
posted by jbenben at 7:23 PM on March 22, 2015 [4 favorites]
If Rabbit is a good friend, I would talk to him, yes. What's his alternate plan, supposing he couldn't get the loan at all? What does he plan to do if the business take more than a year to really get going?
Also, many towns/libraries/cooperative extension/community colleges offer Small Business 101 type classes and workshops. They help walk you through how to figure out your numbers. Any chance Rabbit could take one of those?
posted by LobsterMitten at 7:28 PM on March 22, 2015 [2 favorites]
Also, many towns/libraries/cooperative extension/community colleges offer Small Business 101 type classes and workshops. They help walk you through how to figure out your numbers. Any chance Rabbit could take one of those?
posted by LobsterMitten at 7:28 PM on March 22, 2015 [2 favorites]
Best answer: Many accountants do a free half-hour consultation; I'd consider getting a recommendation for one from the loan officer at a local credit union, and taking the friend to the accountant. Or to the loan officer.
It might be the decent thing for you to pay the accountant a small but decent honorarium afterwards.
Advice from a professional will have more weight than advice from a buddy, and has less potential for wrecking your friendship.
posted by sebastienbailard at 7:56 PM on March 22, 2015 [7 favorites]
It might be the decent thing for you to pay the accountant a small but decent honorarium afterwards.
Advice from a professional will have more weight than advice from a buddy, and has less potential for wrecking your friendship.
posted by sebastienbailard at 7:56 PM on March 22, 2015 [7 favorites]
If you think co-signing for a 7 figure secured loan is nothing, I suggest you co-sign to help Rabbit. Assuming that is not your cup of tea, I would tell Rabbit you are intrigued by the business idea and want to learn more. Then, as noted above, ask basic neutral finance questions. Do not attack the idea, only ask about and refute the numbers.
My other advice is to never do business with family or friends.
posted by 724A at 7:57 PM on March 22, 2015 [10 favorites]
My other advice is to never do business with family or friends.
posted by 724A at 7:57 PM on March 22, 2015 [10 favorites]
It's easier to convince folks if you can point to personal failures or experiences of folks who have failed. It's common for many entrepreneurs to fail a few times while learning how to succeed.
You can only do so much to dissuade someone from a bad idea. Presuming of course, you know how to recognize, quantify and risk-assess an idea to make that reliable determination.
Rabbit's uncertain failure will be his, not yours. If he fails, if he despairs, if he kills himself over a failure, you can't own it. Everyone walks their own path, and even if the path clearly leads over a cliff, some folks are compelled to follow it. I've been witness to a bunch of successes but each one had war stories about prior failures. Given no other info, I'd bet against the first sortie and win most of the time. Experienced people are often stupid. Inexperienced, almost always.
(That said, I've seen the debris of a shitty idea that raised many millions of dollars. I worked a project at RCA that was a disaster (video games). Mark Twain funded one (typesetting equipment). Edison did, too (concrete houses.) I absolutely guarantee you that your friend is neither an Edison nor Twain, nor RCA. I've been party to astoundingly large ones as a minor shareholder (Global Crossing). My own family business was preceded by two bankruptcies, one success, and a near miss at the end of the founder's life that I personally prevented. )
Make a case, present it, make sure you have a clear conscience with your friend. Then, let it go. If he succeeds, buy the champagne. If he fails, buy him some kleenex and be his friend. His life is up to him, as yours is to you.
posted by FauxScot at 7:59 PM on March 22, 2015
You can only do so much to dissuade someone from a bad idea. Presuming of course, you know how to recognize, quantify and risk-assess an idea to make that reliable determination.
Rabbit's uncertain failure will be his, not yours. If he fails, if he despairs, if he kills himself over a failure, you can't own it. Everyone walks their own path, and even if the path clearly leads over a cliff, some folks are compelled to follow it. I've been witness to a bunch of successes but each one had war stories about prior failures. Given no other info, I'd bet against the first sortie and win most of the time. Experienced people are often stupid. Inexperienced, almost always.
(That said, I've seen the debris of a shitty idea that raised many millions of dollars. I worked a project at RCA that was a disaster (video games). Mark Twain funded one (typesetting equipment). Edison did, too (concrete houses.) I absolutely guarantee you that your friend is neither an Edison nor Twain, nor RCA. I've been party to astoundingly large ones as a minor shareholder (Global Crossing). My own family business was preceded by two bankruptcies, one success, and a near miss at the end of the founder's life that I personally prevented. )
Make a case, present it, make sure you have a clear conscience with your friend. Then, let it go. If he succeeds, buy the champagne. If he fails, buy him some kleenex and be his friend. His life is up to him, as yours is to you.
posted by FauxScot at 7:59 PM on March 22, 2015
Say it once, then let it go. Don't throw any money at it under any circumstances.
posted by gerryblog at 8:16 PM on March 22, 2015 [2 favorites]
posted by gerryblog at 8:16 PM on March 22, 2015 [2 favorites]
> Do I have the right to intervene here? The duty?
Neither the right nor the duty. The issue is rather, should you offer your opinion or recommendation about this venture without Rabbit having soliciting your thoughts? And the answer depends entirely on the nature of your relationship with him.
In my opinion, no one without significant business experience and at least 40% of the investment available in cash should be borrowing a 7-figure amount, regardless of whether someone else could co-sign. If the cosigner has the 40%, perhaps a partnership or LLC properly structured between the two of them could work, but it would still have many obstacles.
But no one has asked my opinion, and apparently no one has asked yours.
posted by megatherium at 8:16 PM on March 22, 2015 [6 favorites]
Neither the right nor the duty. The issue is rather, should you offer your opinion or recommendation about this venture without Rabbit having soliciting your thoughts? And the answer depends entirely on the nature of your relationship with him.
In my opinion, no one without significant business experience and at least 40% of the investment available in cash should be borrowing a 7-figure amount, regardless of whether someone else could co-sign. If the cosigner has the 40%, perhaps a partnership or LLC properly structured between the two of them could work, but it would still have many obstacles.
But no one has asked my opinion, and apparently no one has asked yours.
posted by megatherium at 8:16 PM on March 22, 2015 [6 favorites]
Isn't this what bankruptcy is for?
Yeah, no. Not as easy as it used to be.
posted by Cool Papa Bell at 8:59 PM on March 22, 2015 [5 favorites]
Yeah, no. Not as easy as it used to be.
posted by Cool Papa Bell at 8:59 PM on March 22, 2015 [5 favorites]
I think you should decide how much you value this friendship vs. how much it will bother you to watch the trainwreck. Assume they won't take your advice and will feel defensive, and plan accordingly. Your best bet may be to find a better business idea for them.
posted by salvia at 9:51 PM on March 22, 2015
posted by salvia at 9:51 PM on March 22, 2015
I'm troubled by your assumption that you are right and your friend is wrong. By all means, offer him your opinion about his business idea... If you have the kind of relationship that can withstand such honesty... But first disabuse yourself of the notion that you are the Supreme Arbiter of What is Good and Right and that your friend needs your correction. You have some background in finance, OK, but that does not make you infallible. The world is full of established businesses that were once pooh-poohed by their founders' friends and family as being unrealistic and unwise. Give your opinion, with humility, and then stand back and let your friend live his own life, make his own mistakes, and perhaps also have his own successes.
posted by mysterious_stranger at 1:04 AM on March 23, 2015 [5 favorites]
posted by mysterious_stranger at 1:04 AM on March 23, 2015 [5 favorites]
It's possible that you don't have all the information. Your best bet is to ask them to explain their business plan and ask questions. Find out if they've spoken with accountants/investors/other business types for advice.
As they explain it all to you, if they get into an area that seems unworkable then that's when you ask them about risk and consequences.
You can definitely have this conversation with your friend, but your best bet is to go into it as though you want to know more. If you go in with, "This is a really stupid idea AND Rabbit is going to rip you off," your starting premise is that they're an idiot and will make them defensive.
And it's great that you're being a good friend here. Be sure to tell them, "You're my buddy and I will support you no matter what."
posted by kinetic at 2:53 AM on March 23, 2015 [1 favorite]
As they explain it all to you, if they get into an area that seems unworkable then that's when you ask them about risk and consequences.
You can definitely have this conversation with your friend, but your best bet is to go into it as though you want to know more. If you go in with, "This is a really stupid idea AND Rabbit is going to rip you off," your starting premise is that they're an idiot and will make them defensive.
And it's great that you're being a good friend here. Be sure to tell them, "You're my buddy and I will support you no matter what."
posted by kinetic at 2:53 AM on March 23, 2015 [1 favorite]
* Sorry, I meant that Snake is going to rip off Rabbit.
posted by kinetic at 3:08 AM on March 23, 2015
posted by kinetic at 3:08 AM on March 23, 2015
Response by poster: I very much like the idea of hooking Rabbit up with an accountant to talk him through the numbers. I'll ask some folks for accountants they like and talk to them about doing a consultation, and then I'll see if Rabbit wants to meet with them. This seems like the least offensive tactic - an impartial professional just might do the trick.
I figure, if Rabbit is unwilling to meet with an accountant about this, then he's probably afraid to hear that his idea's a bad one. And if that's the case...then there's probably nothing I can do.
Thanks a lot everyone. Lots of insight in this thread.
posted by seinwave at 5:22 AM on March 23, 2015 [3 favorites]
I figure, if Rabbit is unwilling to meet with an accountant about this, then he's probably afraid to hear that his idea's a bad one. And if that's the case...then there's probably nothing I can do.
Thanks a lot everyone. Lots of insight in this thread.
posted by seinwave at 5:22 AM on March 23, 2015 [3 favorites]
I agree with other commentators that Snake is offering something of real value in exchange for the equity in the business. Whether that's worth 1/3, I don't know, because you haven't really told us anything about the particular circumstances. But obviously the bank wasn't willing to offer that lower interest rate, security or not, until Snake agreed to co-sign the loan. I also agree with others that the bank wouldn't be offering a $1 million+ loan if it didn't think there was a real business plan. I mean, maybe your friend is securing the loan with his $5 million house that he owns outright, but I don't get that sense from your question.
Honestly, it sounds like what is going on is that you're more risk-averse than your friend. There's nothing wrong with either model. But starting a business always is a huge risk, loan of this size or not, and I get the sense that you're not comfortable with that no matter what.
Finally, to address your specific questions, I think we would need more information. I think that the propriety of stepping in to address your concerns depends entirely on the nature of your relationship with your friend. Whether you will damage your friendship also depends on your relationship with Rabbit. There are some friends whom people can tell they are making a bad idea, and some friends people cannot. In all likelihood, you already know which kind of friend Rabbit is. I would add that I would not appreciate your passive-aggressive plan to do this through offering a consultation with an accountant, if I were Rabbit. I might or might not be upset that you were criticizing something that is none of your business, but I would for sure not appreciate that you wouldn't just come out and tell me what is on your mind.
posted by J. Wilson at 6:38 AM on March 23, 2015
Honestly, it sounds like what is going on is that you're more risk-averse than your friend. There's nothing wrong with either model. But starting a business always is a huge risk, loan of this size or not, and I get the sense that you're not comfortable with that no matter what.
Finally, to address your specific questions, I think we would need more information. I think that the propriety of stepping in to address your concerns depends entirely on the nature of your relationship with your friend. Whether you will damage your friendship also depends on your relationship with Rabbit. There are some friends whom people can tell they are making a bad idea, and some friends people cannot. In all likelihood, you already know which kind of friend Rabbit is. I would add that I would not appreciate your passive-aggressive plan to do this through offering a consultation with an accountant, if I were Rabbit. I might or might not be upset that you were criticizing something that is none of your business, but I would for sure not appreciate that you wouldn't just come out and tell me what is on your mind.
posted by J. Wilson at 6:38 AM on March 23, 2015
I'm going to take Snake's position for a minute, just because in the past I have had a fair number of people pitch me ideas, with the hopes that I would either invest or cosign loans. I have never heard a pitch that was good enough for me to loosen personal purse strings, or entangle my personal finances, although I have passed people on to VC and Angels.
I say this because it seems unlikely that anyone would cosign a loan if they though the business would fail, because the cosigner is as responsible for the loan as the original lendee. Thus, a 33% stake does not seem overly excessive, given the vast amount of risk. VC wouldn't even touch a deal like that, especially if the original business owner idea doesn't have any capital behind it, either in IP or cash or prototype.
But...and here's the big thing: It doesn't sound like they are pitching the business *at* you. You are not being asked to invest, or take material part in the business, and as such; you may be interfering where interference is not warranted.
It's really hard to watch a friend do something that you think might fail. Starting and running a business is insanely hard, and requires a certain type of human to make it work. But there is no template for who that successful person is going to be. Were it me, and I were in your situation, I might suggest an accountant, I might listen to them over lunch tell me about the business plan, but I would not be the Negative Nelly telling them not to do it, or warning them away from potential partners. Everyone has their own path to follow, and to restrict someone because you fear they may fail is to deny them the freedom to do exactly that.
posted by dejah420 at 7:11 AM on March 23, 2015
I say this because it seems unlikely that anyone would cosign a loan if they though the business would fail, because the cosigner is as responsible for the loan as the original lendee. Thus, a 33% stake does not seem overly excessive, given the vast amount of risk. VC wouldn't even touch a deal like that, especially if the original business owner idea doesn't have any capital behind it, either in IP or cash or prototype.
But...and here's the big thing: It doesn't sound like they are pitching the business *at* you. You are not being asked to invest, or take material part in the business, and as such; you may be interfering where interference is not warranted.
It's really hard to watch a friend do something that you think might fail. Starting and running a business is insanely hard, and requires a certain type of human to make it work. But there is no template for who that successful person is going to be. Were it me, and I were in your situation, I might suggest an accountant, I might listen to them over lunch tell me about the business plan, but I would not be the Negative Nelly telling them not to do it, or warning them away from potential partners. Everyone has their own path to follow, and to restrict someone because you fear they may fail is to deny them the freedom to do exactly that.
posted by dejah420 at 7:11 AM on March 23, 2015
I might simply run through the math with him, and tell him you're worried...
posted by xammerboy at 8:12 AM on March 23, 2015
posted by xammerboy at 8:12 AM on March 23, 2015
Stay completely out of this. Don't give any unsolicited advice.
The bank wouldn't be making that kind of loan willy nilly.
Some people are like you (an me for that matter) - risk adverse, willing to take the slow road to riches, probably never going to put IT ALL on the line.
Other people are like Rabbit and Snake (and my boyfriend) - willing to risk it all to win it all and more, like big, fast steps, no pain no gain mindset. I think theyre crazy, but sometimes they make it work, sometimes they fail, but fundamentally they just keep at teh risk until something pays off.
If its not your money or your risk, just stay out of it to preserve the peace.
posted by WeekendJen at 9:02 AM on March 23, 2015 [1 favorite]
The bank wouldn't be making that kind of loan willy nilly.
Some people are like you (an me for that matter) - risk adverse, willing to take the slow road to riches, probably never going to put IT ALL on the line.
Other people are like Rabbit and Snake (and my boyfriend) - willing to risk it all to win it all and more, like big, fast steps, no pain no gain mindset. I think theyre crazy, but sometimes they make it work, sometimes they fail, but fundamentally they just keep at teh risk until something pays off.
If its not your money or your risk, just stay out of it to preserve the peace.
posted by WeekendJen at 9:02 AM on March 23, 2015 [1 favorite]
In your predicted scenario where the business fails, Snake ends up with 33% of nothing, and is liable for the whole debt as she is the one with assets. Doesn't sound predatory, sounds like they're both heading to disaster.
posted by w0mbat at 12:37 PM on March 23, 2015 [1 favorite]
posted by w0mbat at 12:37 PM on March 23, 2015 [1 favorite]
Although I haven't had a friend in this specific situation, there have definitely been situations where I could see a friend going down what I personally believed to be a bad path. What I've trained myself to do (and believe me, it is HARD sometimes!) is this:
When (and only when/if) the other person brings it up, ask them: "Hey, do you want my opinion/advice on this, or are you looking for a place to just vent or tell me what's going on?" If and only if they ask for advice, I will give my honest opinion. If my friend tells me they just need to vent or that they otherwise don't want my advice, I butt out. Obviously if there were a situation where someone were about to commit suicide or physically harm another person, I would intervene more strongly (this has not been the case for me, thankfully). But when it's at the level of "this is a shitty financial call" or "this is going to fuck up your marriage," I strongly believe it's not my place to offer unsolicited advice. Frankly, if someone does not WANT your advice, they're really not very likely to take it, either because they don't happen to respect your opinion on this matter (rightly or wrongly) or because they've already made up their mind and need to come to any change of heart on their own terms and in their own time.
posted by rainbowbrite at 11:50 AM on March 24, 2015
When (and only when/if) the other person brings it up, ask them: "Hey, do you want my opinion/advice on this, or are you looking for a place to just vent or tell me what's going on?" If and only if they ask for advice, I will give my honest opinion. If my friend tells me they just need to vent or that they otherwise don't want my advice, I butt out. Obviously if there were a situation where someone were about to commit suicide or physically harm another person, I would intervene more strongly (this has not been the case for me, thankfully). But when it's at the level of "this is a shitty financial call" or "this is going to fuck up your marriage," I strongly believe it's not my place to offer unsolicited advice. Frankly, if someone does not WANT your advice, they're really not very likely to take it, either because they don't happen to respect your opinion on this matter (rightly or wrongly) or because they've already made up their mind and need to come to any change of heart on their own terms and in their own time.
posted by rainbowbrite at 11:50 AM on March 24, 2015
I believe that Snake -- consistent with her behavior in the past -- is being a little predatory here. She's getting free equity for almost nothing, especially since this would be a secured loan.
However, even with the lower interest rate, the mortage payments + insurance + taxes on the loan come close to $100K. Rabbit's business idea doesn't have a realistic chance of producing that much per year.
So you are worried that Snake is going to get free equity from a business that certainly will lose money?
posted by yohko at 12:53 PM on March 24, 2015 [1 favorite]
However, even with the lower interest rate, the mortage payments + insurance + taxes on the loan come close to $100K. Rabbit's business idea doesn't have a realistic chance of producing that much per year.
So you are worried that Snake is going to get free equity from a business that certainly will lose money?
posted by yohko at 12:53 PM on March 24, 2015 [1 favorite]
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What happens if the business goes bad is: the business can't make the payments, the bank takes back the security. Business assets in a liquidation are rarely even close in value to what they cost initially. So then the bank goes after each signer, and it doesn't matter about the percentages of ownership. If they still need $350,000 after selling the assets at fire sale prices, and Rabbit has nothing and Snake has $300,000, they'll take the $300,000 from Snake.
So that isn't the part that's necessarily a bad deal.
THE PART THAT'S A LOUSY DEAL IS TAKING OUT A SEVEN FIGURE LOAN, ESPECIALLY IF YOU THINK THE BUSINESS IDEA IS BAD.
So if you consider yourself a close friend to Rabbit, you should probably talk to them. I've no idea how you avoid seeming meddlesome. If they're determined to do this the chances of talking them out of it are low. I'd ask to walk through the math with them. The 100K a year, however you arrived at that, would only be the tip of the iceburg. Your friend should go through all their project expenses, and figure out how they can make all those payments. If their business plan is "immediately do a landoffice business or else perish," that's not a good plan. Most businesses struggle for the first 3-5 years. It's not that you get NO business, but customers are slow to beat down the door of a new business. And if Rabbit needs a co-signer, they probably can't stand the cashflow problems associated with a 7 figure idea.
I would only talk to "Snake" out of concern for them and making sure they understand the risks they're taking, not coming at them as if they're selfish. But be prepared to lose Rabbit as a friend if you do this behind his back.
posted by randomkeystrike at 6:50 PM on March 22, 2015 [12 favorites]