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lending to a friend for business


29-Sep-2025 (In Recovery Law)
As a friend I lend amount to my friend in some lakhs for the mutual partnership and the money was invested in business however there were no written agreement between two. Now the business is closed due to loss within a year. Now the friend is asking for the money in return and saying as there is no agreement, so the friend is saying it is kind of loan and asking for the money. Is there any legal way by which any case can be lodged on the friend. What are the legal implications on this case.
Answers (2)

Answer #1
666 votes
Purpose of Loan - Understand exactly what the money will be used for in the business. 2. Amount & Terms - Decide how much you can safely lend (without putting yourself in financial stress). 3. Written Agreement - Always draft a written loan agreement that includes: Amount lent Repayment schedule (monthly/quarterly/lump sum) Interest rate (if any) What happens in case of default 4. Security/Collateral - If the amount is big, you may want some security (like property, assets, or personal guarantee). 5. Mode of Payment - Transfer through bank (not cash) so you have proof. 6. Legal Angle - If thinas go wrong, you may need the agreeme legal recovery.
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Advocate Mahrukh Khan

Adv. Mahrukh Khan

LawRato Mumbai | 200+ Answers
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Answer #2
892 votes
Your friend cannot ask for money as this is a business transaction and as all business transactions of losses are incurred it will be shared by both the partners, also in absence of partnership agreement Indian partnership act will automatically apply, and it is not compulsory to register a partnership agreement. It can either be a registered or unregistered partnership firm, or it can be registered later, if required. but asking for money back is no where legal, send the person a legal Notice stating that you don't owe the person anything, and the losses will be shared mutually.
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Advocate Moksh Jain

Adv. Moksh Jain

LawRatoMumbai | 100+ Answers
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