Borrowing $1 Million: How to Respond and Assess Repayment Ability

When faced with a request to borrow a significant amount of money, such as $1 million, it is crucial to handle the situation with professionalism and consider several key factors before making a decision.

Assessing Repayment Ability

Before lending out such a large sum, it is essential to thoroughly assess the borrower's ability to repay. This includes:

Income: Verify the borrower's income sources, stability, and potential for growth.

Debt-to-income ratio: Calculate the borrower's total monthly debt payments relative to their income. Ideally, this ratio should be below 36%.

Credit history: Review the borrower's credit score and payment history to determine their financial responsibility.

Collateral: If possible, secure collateral to mitigate the risk of nonpayment, such as real estate or other valuable assets.

Purpose of loan: Understand the intended use of the funds to assess the potential for repayment.

Crafting a Professional Response

Once you have assessed the borrower's repayment ability, craft a professional response that conveys your decision clearly and respectfully. Here are some examples:

If you agree to lend the money:

"Thank you for your request. After careful consideration of your financial situation and the information you provided, I am pleased to approve your loan of $1 million. Please review the loan agreement carefully and contact me if you have any questions."

If you decline the request:

"Thank you for your request. While I appreciate your business, I have decided not to lend you $1 million at this time. After reviewing your financial information, I am concerned about your ability to repay the loan."

If you need more information:

"Thank you for your request. To make a more informed decision, I would need additional financial information, such as your tax returns or bank statements. Please provide these documents to me for further review."

Final Considerations

Lending money, particularly large sums, is a significant financial decision. By carefully assessing the borrower's repayment ability and crafting a professional response, you can minimize risk and protect your financial interests while maintaining a respectful relationship.

Remember, it is always prudent to consult with a financial advisor or legal professional if you are considering lending a significant amount of money.