The main thing you should think about is are they going to be able pay to fix or replace the tool if its become broken during their use. My guess most of the time is no they are not; because if their asking to borrow a tool chances are they don't have the money to fix or replace the tool if it becomes broken.
Now I'm not talking about a screwdriver or a hammer. I'm talking about things like a pressure washer, lawn mower, or power saw. I know it seems crappy to think this way but, in this day and time how could you not.
What I normally do is ask them what type of project do they have going on and volunteer to help them. This allows two things. It says to them I'm a good neighbor because I willing to help them and I'm very protective of my tools so I'm going to be there while you use it to insure that it gets used properly.
Now if you have the money to replace your tools if they do break it. Then by all means loan you tools out and be the free rental store for the whole neighborhood. I will continue to be cautious with my things due to money not growing on trees.
After writing this blog I am reminded by another thing my grandfather use to say all the time. He use to say "If you have to borrow something from someone more than twice, You need to go buy one." I thought about that statement he made years ago and think to myself. "He's da gum right."
I have used this ideology over the years not even knowing it. It has served me well and has kept me out of trouble. It's funny how the little things you get told when your younger sticks with you and guides you to this day. It has also saved me money over the years