A promissory note is a promise by the borrower to repay the lender on a specific date or dates, usually with interest. In my experience there have been more worthless notes than good ones. Strange as it may seem, the worst promissory notes have come from friends, and the closer the friend the worse the note. When a person is in need of funds he naturally turns to the people who can least refuse him and these are often his friends. It is most difficult to say you are a friend in one breath and refuse to lend $1,000 in the next. It is well in such a case to remember that the person wanting the loan had no hesitation about asking you for your hard earned money. For many years I have had a stock reply ready to friends who ask for loans: “That’s funny; I was just going to ask you for a loan.”

Such an attitude may seem hard and cold, but it was developed after I had lost over $35,000 lent to various friends over the years.

Early in my business career I got the right answer, but I guess I forgot it. Shortly after I was out of college and working in New York, a friend of mine who also lived in the YMCA asked me to lend him some money because he had no funds with which to buy meals. Since I then had the princely salary of $31.15 a week I felt I should let this friend in need have some money. I did $10 but as far as I went it was not a loan. It was a gift. I never expected to get it back and I never did. Years later the same friend asked me for a loan of $1,500 to buy a business. I inquired whether he would give me a second mortgage on his property. He became indignant and told me I was no friend to ask for col lateral, that his word should be good enough. Perhaps his word became more valuable over a period of 20 years! Investment - Read More.