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      07-12-2013, 07:33 PM   #1
SHEEDI
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Question Co-signer for Business Loan - Help

Hello,
One of my close Friend runs a business and he has applied for business loan on the behalf of his business,not on the behalf of his credit. He is asking for favor to sign for his buniess loan as co signer. I am bit scarred. I have few questions. you guys might help me here to decide to help him or not.

1. What are my obligations if he is unable to pay loan or pay loan on time.
2. What are Pros and Cons if I sign as a co signer.

Your thoughts/inoput will be much appreciated.

Thanks
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      07-12-2013, 07:51 PM   #2
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Quote:
Originally Posted by SHEEDI View Post
Hello,
One of my close Friend runs a business and he has applied for business loan on the behalf of his business,not on the behalf of his credit. He is asking for favor to sign for his buniess loan as co signer. I am bit scarred. I have few questions. you guys might help me here to decide to help him or not.

1. What are my obligations if he is unable to pay loan or pay loan on time.
2. What are Pros and Cons if I sign as a co signer.

Your thoughts/inoput will be much appreciated.

Thanks
Dont do it unless

A: you have faith in his business
B: you have some sort of "shares" in the business. IE: profit
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      07-12-2013, 07:59 PM   #3
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Quote:
Originally Posted by j_marinelli View Post
Dont do it unless

A: you have faith in his business
B: you have some sort of "shares" in the business. IE: profit
Thanks for input. I didn't ask to do it or not to..my questions are

1.What are my obligations if he is unable to pay loan or cant pay loan on time?
2. Would it effect my credit history?
3. What are Pros and Cons if I sign as a co signer?
4. If I sign as co -signer,After few months can I take my name off as co signer?
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      07-12-2013, 08:18 PM   #4
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Quote:
Thanks for input. I didn't ask to do it or not to..my questions are
1.What are my obligations if he is unable to pay loan or cant pay loan on time?
You are liable, and it will affect your credit if you are not able to make payments on his behalf.

Quote:
2. Would it effect my credit history?
No, unless it becomes your liability and you aren't able to pay the loan for him.

Quote:
3. What are Pros and Cons if I sign as a co signer?
There's no pros for you but cons if #1,2 become your problem.

Quote:
4. If I sign as co -signer,After few months can I take my name off as co signer?
No.
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      07-12-2013, 10:23 PM   #5
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i'm reminded of charlie sheen in wall street. meaning he's potentially looking for a fall guy
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      07-12-2013, 10:46 PM   #6
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Quote:
Originally Posted by SHEEDI View Post
Thanks for input. I didn't ask to do it or not to..my questions are

1.What are my obligations if he is unable to pay loan or cant pay loan on time?
2. Would it effect my credit history?
3. What are Pros and Cons if I sign as a co signer?
4. If I sign as co -signer,After few months can I take my name off as co signer?
1. You have to pay. You're just as responsible for the loan as he is if you co-sign

2. Sure. If he can't repay the loan and you can't repay it your credit history will absolutely be affected.

3. There are no pros. You would be extremely foolish to co-sign his loan unless you're really good friends with him and you wouldn't mind repaying 100% of the principal + interest if it comes to that. Sure, it probably won't come to that, but you have to be prepared to do that.

The only "pro" is your friend will be a very happy person.

4. No. Once you sign, it's a done deal.

Even if you get shares of his business (which in and of itself is a tricky business where you have to read the fine print), I still wouldn't do it. The vast majority of small businesses fail.
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      07-13-2013, 12:48 AM   #7
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Loans need a co-sign for a reason. If they didn't need one, they wouldn't need you to sign. Pretty simple stuff. Simple advice in life, any thing you sign, you are most likely liable for or relieving liability from others.
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      07-13-2013, 02:16 AM   #8
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If all these posts haven't already helped you determine your decision then I don't know what will.
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      07-13-2013, 09:03 AM   #9
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Thanks guys. I am not doing it.
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      07-13-2013, 09:10 AM   #10
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Was this a serious question?

"You're a moron of you start a business on loan."

- Mark Cuban
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      07-13-2013, 10:46 AM   #11
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Quote:
Originally Posted by BayMoWe335 View Post
Was this a serious question?

"You're a moron of you start a business on loan."

- Mark Cuban

Seemed to work for Apple.

Nothing wrong with using someone else's money so long as the plan is solid and it is executed properly.
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      07-13-2013, 11:21 AM   #12
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Quote:
Originally Posted by MrRoboto View Post
Seemed to work for Apple.

Nothing wrong with using someone else's money so long as the plan is solid and it is executed properly.
I love anecdotal evidence.

I will see your "It worked for Apple" and raise you a "It ruined my buddies life he's now 50 years old living in his parents apt".
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      07-13-2013, 12:52 PM   #13
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Quote:
Originally Posted by dreamingat30fps View Post
I love anecdotal evidence.

I will see your "It worked for Apple" and raise you a "It ruined my buddies life he's now 50 years old living in his parents apt".
depends how it's done. personally i would borrow only as a last resort. i've done the payments/loans life and living cash is much better imo.

don't spend money you don't have... even people in h.s. knew that
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      07-13-2013, 06:17 PM   #14
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Quote:
Originally Posted by dreamingat30fps View Post
I love anecdotal evidence.

I will see your "It worked for Apple" and raise you a "It ruined my buddies life he's now 50 years old living in his parents apt".
Can you elaborate on your buddies business plan a bit?
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      07-14-2013, 12:19 AM   #15
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Quote:
Originally Posted by dreamingat30fps View Post
I love anecdotal evidence.

I will see your "It worked for Apple" and raise you a "It ruined my buddies life he's now 50 years old living in his parents apt".
Have you ever heard of project financing?
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      07-14-2013, 07:29 PM   #16
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Quote:
Originally Posted by BayMoWe335 View Post
Was this a serious question?

"You're a moron of you start a business on loan."

- Mark Cuban
just sign, and if things go south, file for bankruptcy lol at least you didn't lose your cash haha
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      07-15-2013, 09:47 AM   #17
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If the guys needs a co-signer for the business loan it means the business does not have the finances to back up the loan. Banks will cut a loan for a business if they been doing business for a while, and can show cash flow as well as some sort of contract for future business. The other thing Banks will allow is putting personal assets up as collateral. Is sound like this guy has neither so he needs someone who have this to back his loan up.

From a credit history stand point, if you co-sign the loan it will show up on a credit check as an outstanding liability you have. Similar to a second mortgage on your home.

Even if they person does not default it will be counted against you in your overall credit rating.

Last edited by Maestro; 07-15-2013 at 11:37 AM.
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      07-15-2013, 10:43 AM   #18
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Quote:
Originally Posted by bosster hymen View Post
depends how it's done. personally i would borrow only as a last resort. i've done the payments/loans life and living cash is much better imo.

don't spend money you don't have... even people in h.s. knew that
Or in your case, if mom and dad have it you're good.
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      07-15-2013, 11:46 AM   #19
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      07-15-2013, 12:14 PM   #20
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Quote:
Originally Posted by BayMoWe335 View Post
Was this a serious question?

"You're a moron of you start a business on loan."

- Mark Cuban
Says the guy giving out money for business start ups. Obvously not free money.

From Mark's stimulus blog....
Quote:
11. If you do get money, it goes into a bank that I specify, and I have the ability to watch the funds flow and the opportunity to require that I cosign any outflows.
12. In your business plan , make sure to specify how much equity I will receive or how I will get a return on my money.
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      07-15-2013, 04:27 PM   #21
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Never do business with friends. Always ruins friendships.
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      07-15-2013, 10:19 PM   #22
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