What do you do when family members or friends need a loan? Do you say no, to avoid potential problems? Or yes, and regret it later? More Than Money member Mark McDonough found a service that takes a lot of the trouble away: Circle Lending, a for-profit company that sets up and administers loans to family and friends. McDonough says, "The best part about Circle Lending is that it slows down the process, so both the lender and the borrower can be more realistic and specific about the payback terms. This significantly increases the likelihood of being paid back."�

The Circle Lending service:

• connects lenders and borrowers to resources to help them structure formal loan terms
• processes all financial transactions for lenders and borrowers
• provides online accounting for lenders and borrowers to easily check on the status of loans made
• reminds borrowers of upcoming payments due

Besides setting up new loans, Circle Lending also helps formalize existing ones. According to Jill Miller, Circle Lending's vice president for marketing, the normal default rate on person- to-person loans is more than 14 times that of bank loans, while loans made and administered through Circle Lending have a default rate of under five percent. Benefits to borrowers include the opportunity to demonstrate creditworthiness, because the loan is formally documented.

Although we know of many organizations that facilitate micro-loans to entrepreneurs, Circle Lending is the only one we know of that facilitates loans between family and friends. If you know of others, please let us know!

Contact: www.circlelending.com , 800-805-CIRCLE or 617-859-0099

See also: "MTM Online: Equitable Giving in the Family," More Than Money Journal Issue #29, in which members of More Than Moneys e-mail discussion group share tips about loaning money to family and friends.

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