Money and Friends, part II

I mentioned my friend AB before, where I offered him a loan for some emergency car repairs. Side A was yelling at me "Don't do it!" and I asked why. They told me that it would damage our friendship. And if he can't pay, then things can get ugly. They told me to get a contract, witnesses, and even a notary! Or to simply gift, which I think is an awesome idea, but not quite the topic here. I'm looking at strictly loans, and they said no. 

But wait, I have faith in the world. I don't think Side A is the only way to go. Can lending money to friends be done right? Absolutely. But this goes against the grain. 

Side B: Lending money does not have to ruin the friendship. It can be managed.

Things you have to consider:

-Your friend: Do you really expect them to follow through on their word? 

-The amount of the loan: You should only loan what you can afford. Period. They're borrowing from money you can spare, not money you have.

-The reason: I am not asking for you to pry as to why they need a loan or why they don't have the money, but just have a general idea. Are they borrowing because of a need or a want? 

-Alternatives: Why you? Depending on the amount, why not a bank, a(nother) family member or a(nother) friend? 

-Payment schedule: Make sure you are both clear of what is expected, when and how. 

-Consequences: What happens if they don't pay? Will you call them and remind them like a collections agency? Will you let it go and not lend them money anymore? Will you require a collateral item in exchange of the loan? You don't have to be harsh. And just like the NO side, think in terms that they are never paying you back. Can you live with that without that amount without hurting your relationship with them? If not, then it may be better to say no to lending, or gifting or offering alternatives.

So how about you? Anything else I need to add to the list of things to consider for a smooth lending process?

I have loaned money to my family (outside of my payments for the car, car insurance, groceries and utilities, and 'family Murphy'), and I have never honestly expected them to pay back. I would like to say I am a different person now, but I would still not expect any payments from them. But that's for my family. I have not loaned money to friends, but I think I would expect payment back. I wouldn't be terribly disappointed if they didn't pay me back, and I would most likely forgive the debt without making a dent in the relationship. Next time they ask, though, I'd probably say no and that'd be that. I can't control whether they want to dent the relationship based on me saying no, and if they do, well, that's that. I definitely wouldn't say 'yes' just to keep a relationship. 

What about your experiences?