"The holy passion of Friendship is of so sweet and steady and loyal and enduring a nature that it will last through a whole lifetime, if not asked to lend money."

Mark Twain

Lending money to friends -- or borrowing from friends -- is a risky business typically clouded with a sense of dread.

"It's something everybody does at sometime in their life," says a Washington stockbroker, "but nobody wants to talk about it."

More than money is at stake if a friend asks you for $800, promises to pay you back in six months and doesn't. "It's the ultimate insult to a trust," says a Maryland businesswoman who lent a school friend money during her divorce procedure. "When she didn't pay me back, it was as if she had dismissed me as a person."

It can be just as awkward -- tinged with all kinds of psychological implications -- from the borrower's point of view.

When a 26-year-old Washington publicist borrowed $1,000 dollars "from a wealthy friend" -- with no written agreement -- he "at first felt bothered," but decided to pay him back in increments of $100 over a year's time.

"I didn't want the money hanging over my head," he says, adding that he believes his friend "likes the idea of my owing him money because it shows he's superior." And yet after a year's time, he concedes he still owes "a couple hundred" on the loan, even though he could pay it back "anytime."

"We both have businesses and he doesn't need to borrow. He has the edge," says the publicist. "But whenever we get together with mutual friends he'll mention [the loan] as a joke. Subconsciously I guess I don't want to pay it all back, and I don't know why."

The meaning of money goes a lot deeper than our pockets, says Dan Kegan, 40, a Chicago organizational psychologist and attorney whose writings and work focus on how money helps or hinders personal relationships in business.

"Once you peel back the layers of meaning," says Kegan, "the issue of money becomes other issues of power, control, even intimacy.

"It's not surprising that people don't like to talk about lending experiences. It's embarrassing if they didn't get the money back, for to them it means they are, at best, a little out of control, and at worst, stupid. Of course that's not true, but the loss still doesn't feel good. Money problems can speed up the death of a friendship."

And yet, points out Kegan, there is the "rags to riches mythology we all love -- borrowing money and making good."

When New York writer Andrew Tobias graduated from Harvard Business School, he "borrowed $300 from a friend . . . to get started." Today, Tobias, 35, who is considered a "whiz kid" of financial advisers (The Only Investment Guide You'll Ever Need, Money Angles, among others), describes such personal loans as "humiliating, but necessary."

"Never venture in any investment with a friend unless you're prepared to lose," advises Tobias. "It's a gamble. If it's done admirably, then you've won. But it's always touchy.

"The prime interest is the friendship. If your friend comes to you for money and your immediate instinct is to say, 'Yes,' then go with it." Or if you say "No" instantly, you might cushion it with, " 'I'm sorry, I would love to, but I don't have the cash.' "

One alternative to saying no, says Tobias, is to offer to guarantee a loan at a bank. "This way it becomes the bank's problem, not yours, and there's no resentment towards you." Besides, he adds, a person is "less likely to default with the bank than with someone privately."

While Tobias advocates an "instant reaction" to lending, financial psychologist Kegan suggests "being prepared" ahead of time, by deciding whether or not you are the type who would lend money.

"The more someone understands his/her feelings about money and how he/she operates, the easier it will be," says Kegan. "Ignoring the issue before it happens isn't going to help."

Once you ask yourself if you can part with what money you have -- both emotionally and financially -- Kegan contends you'll "be more rational and effective" when your friend comes for money, whether for $50 or $3,000.

No amount of readiness, however, can prepare some people for the loss of friendships when a loan doesn't work out. Their stories may be both bitter and poignant.

"My parents had a close friend everyone loved," recalls a middle-aged Washington attorney, "but I knew that he had never paid back my parents the $5,000 they lent him many years ago. Knowing this clouded my opinion of him, despite all his other obvious attributes. He died recently and I honestly felt little regret."

Says a 50-year-old hotel executive, "I still hurt," even though 10 years have passed since a close college friend borrowed -- and never repaid -- $5,000 to start a new business. "Once you peel back the layers of meaning, the issue of money becomes other issues of power, control, even intimacy." -- Dan Kegan

"It's not the money that hurts; it's that we are no longer friends. Even though we live 2,000 miles apart, we used to talk on the phone at least once a month. Now we never do.

"I tried to tell him that it's okay without embarrassing him. But I think because his business failed, he was humiliated and was never able to pick up the pieces. Anyway, that money became a big block between us.

"But I do know this will never happen to me again. Another friend called awhile ago and asked if I could lend him $1,000. The money would be no problem, but I had to say, 'I can't do it, I can't do it because I don't want to lose you as a friend.' "

Some people who have not been burned have no trouble lending money -- once. "If a good friend needs money," says a Washington businesswoman, "I would gladly help him. But if he continually comes back, then there's resentment and trouble."

Fear can be another factor. "People at all levels of economic earning are anxious how they're going to make it in the next five years," says Kegan. Consequently would-be lenders may be less likely to help a friend if they are asking themselves -- "Am I going to need that money?" or "Who's going to take care of me?"

Even people who are comfortable financially may be threatened by money matters, as demonstrated by the rise of support groups (about 20 across the country) for "women of inherited wealth" who are insecure with how their money affects relationships and friendships. The wealthy, long considered "an easy mark," may suffer from not knowing if they are liked and admired for themselves or their money. See box.

Whether rich, comfortable or struggling, it appears that most people who lend "don't like to get involved with what the money is for."

"I never ask," says Tobias, who also doesn't necessarily prefer written agreements and certainly "no interest rates."

A 37-year-old Washington deli owner, who claims to "often and successfully" lend friends "around $500," is "careful," he says, in "knowing a lot about the friends I give to, but one thing is I don't get involved in what they need the money for. That's not my business."

Because money is more personal than sex, according to Kegan, questioning a friend about his/her financial crises is often "too intimate, or pitiful." Lenders are apt to shy away from hard luck stories, preferring "to keep their distance."

There are people, however, who do want to know what the money is for, says Kegan, and finding out gives them the opportunity to be more helpful. For these people, understanding the circumstances of the loan provides another aspect of the relationship that is "positive" and "individual."

Most people do not share the same expectations in money-lending transactions -- they may not even be conscious of them -- and invariably there will be misunderstandings. Although addressing the inevitable question, "should there be a written agreement?" can be awkward among friends, Kegan believes that one is essential for loans in amounts "that matter" to the lender.

"Put it in writing and make it verifiable when and how much is owed."