Here's a hypothetical question for a Sunday evening...

This is mainly for shop owners.....would any of you finance let's say a $10K zero percent interest loan to an employee so the employee could buy a lathe? The lathe would remain the said employees property, but be placed in the Employers shop; and be used only by said employee in the Employers shop for repair purposes on Employers equipment; and would be used for personal use by the said employee.

Any thoughts?...

Check your sentence structures.


Rent it or lease it, much easier to repo. Have a structured buyout proposal; if he busts his ass and can pay it off in 90-180 days, let him.

You wouldn't do this for just any employee, but his departure wouldn't be "just any employee", would it?

Would you freak out if he gave 30 days notice, while owing you money, or just 30 days into the agreement?

You are a nice guy, I suspect, but how nice, and how trusting, and how much detached?

I'd want to have an exceptional trust in that employee to go down that route.

What happens if there is an accident, say late at night on your property? What happens as "your time" and "his time" get a bit mixed up in the months ahead?

Also note that you're not just giving a zero percent loan, with no real collateral -- you're providing free shop space, electricity, etc.

It wouldn't surprise me that this fellow really wants to be on his own -- perhaps part-time, perhaps eventually full time. So, in a sense you're investing in his new business without much promise of a return. Whether that's a good idea (he'll still be close at hand to fix your stuff) or a bad idea (he'll just move on, sooner than later) is something you'll have to weigh in.

I'm guessing the question is being asked by the want-a-lathe employee rather than the no-interest-loaner-to-be?

Somebody is going to get madly butt-hurt in that deal.

I can see the screwing going both ways.

I'm the employee, you give me 10 grand, I go to the Bahama's, nice knowin' ya.
I actually get the lathe and put it in your shop, I use your tools and walk out with all kinds of stuff after hours when I'm working on my own stuff. I'm working on my own stuff, while I'm getting paid hourly by you.

I'm the employer, I let you make a few payments, then I fire you and keep your lathe. I pay you your regular hourly wage to make parts for me on your own equipment. Since the lathe is on my property, and your my employee, Joe Blow is going to run the replacement parts (on your lathe) while you are working on cleaning the toilet.

sounds like a 100% bad idea all around. I'm not saying it can't or won't work, I just think the possibility for abuse on both ends is huge, and not worth it, for either party.

I agree with the above. My only addition is never loan out money expecting to get it back. It makes it much sweeter when you do.

vonleyser said:

...Any thoughts?...

Click to expand...

Don't do it.
There is nothing in it for you.
If employee wants to go into business rent him some space and let him buy his own stuff.
SM

It's not the employees machine until he's done paying for it.
I could see it if it was a plant that didn't have a lathe or mill to support their operation and repairs and wanted to get away from using outside services, but in that case they should buy their own machine anyway.

Overall no, I see nothing good in that deal. If the employee wants to dick around on his stuff after hours ask the boss maybe he's cool with it. But for me to pay for my employers machines(cause that's what it is..) so that they can't double benefit from it, and apparently not allow to do other $ work after hours, very big eff that.

You should make an agreement with the bank. The bank won't machine parts and you won't make loans. This is just tragic accident waiting to happen.

When someone gets hurt on *that* machine, what will the insurance company say?

$10,000 is within striking distance on at least two of my credit cards, and I really don't make much money; I just pay my bills

So.... if the employee is a machinist, and in good standing, I will not believe he cannot get a $10,000 line of credit, somewhere...

And NO, don't cosign, either.

If for some reason you really want to help the guy out, set up a mini barn with heat and power and porta potty, set up a real loan with a real payroll deduction, and be prepared to get all medievial on him if he fails to live up to the expressed and implied conditions of the loan.

My brother had a shiny little thing lying about his house, it was the size of a 1/4 inch drill bit, I asked "What?", he said "Solid carbide boring bar".

Heck, that could have come home in his pants cuffs, I don't know...

This stuff gets expensive, fast, and when the other employees start getting jealous (because he is a self-starter, risk-taker, etc.), you will have no idea whose stories to trust.

Help him out, but don't give him the keys to the kingdom.

Good Luck,
Steve

Is this in a machine shop that already has lathes and tooling? Or is this in a manufacturing business that has no lathe access currently, and would benefit from such?

The road to hell is paved with good intentions... and in this instance, there's barely any paving to do before you get there.

Don't do it. There's financing out there and plenty of square footage currently vacant.

You get the benefit of the lathe

Employee gets the benefit of the lathe

Employee must be trustworthy for you to ask this question

You dont have to pay for the lathe

I think it is a win win situation and will likely keep a good employee happy and not make him into your competition