My BIL has a harsh but effective approach, he tells them when they ask to borrow equipment if it gets damaged not to bring it back just bring cash, basically if you break it you bought it. He says no one has ever taken him up on the offer.
Based on my experience I'm done loaning anything to anybody unless I am there to insure it is being used properly. Even if the damage was outside anyone's control a friend would feel responsible and you would always wonder if it could have been prevented had they done something differently.