Legal Question in Credit and Debt Law in Pennsylvania

Your friend just has to sign a promissory note. Although you can find samples for free on the internet, I would go to a local business lawyer.

First, is your friend a business? If this is a business loan, then the consumer rates do not apply and the rate can be anything. I suggest that it be commercially reasonable though. In PA, the maximum rate is 6% for a loan under $50,000 if it is a personal loan.

See the Loan Interest Protection Law, 41 P.S. � 201, Maximum Lawful Interest Rate.

You are giving this friend a nice chunk of change. What if he cannot pay it back? You need to think through the ramifications of this. If he is a business, then you are loaning money to his business. You should also make him sign a personal guarantee. What sort of government contract is this? What is he doing? That may also dictate how you structure this loan. Again this is why you need to hire a lawyer to draft this carefully to make sure that the promissory note protects you and him. You also want to include a provision allowing you to recover attorney fees and collection costs if he does not pay you back.

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41 P.S. � 201 - Maximum Interest Rate; Exceptions

(a) Except as provided in Article III of this act, the maximum lawful rate of interest for the loan or use of money in an amount of fifty thousand dollars ($50,000) or less in all cases where no express contract shall have been made for a less rate shall be six per cent per annum.

(b) The maximum lawful rate of interest set forth in this section shall not apply to:

(1) an obligation to pay a sum of money in an original bona fide principal amount of more than fifty thousand dollars ($50,000);

(2) an unsecured, noncollateralized loan in excess of thirty-five thousand dollars ($35,000); or

(3) business loans of any principal amount.