If a person is approached by two different people in need of a loan, and he is able to lend to only one of them, to whom should he afford precedence?
Rabbi Moshe Halevi addresses this issue in his work "Milveh Hashem," and rules that if a person is approached by a poor person and a wealthy person, priority is given to the poor individual (as discussed in a previous Daily Halacha). If the two people's financial statuses are roughly equal, but one of them is related to the lender, then the relative is awarded precedence. If neither are related to the lender, but one of them resides in the same town as the lender, then the fellow townsman is given preference. (See Rabbi Moshe Halevi's "Milveh Hashem," pages 14-15.)
If a person is approached for loans by a Jew and a gentile, then he must grant the Jew precedence. Even though the gentile offers to pay interest on the loan, while from the Jew, of course, the lender cannot receive interest, he should forego on the potential profit and give the Jew an interest-free loan. This is the explicit ruling of the Gemara in Masechet Bava Mesia (71A). (Ibid page 26)
In introducing the obligation to lend money, the Torah speaks of lending money to "Ahicha" "your brother" (Devarim 15:7). The Sages understood this term to mean "Ahicha Be'misvot" "your brother with regard to Misvot" thus indicating that the obligation to lend money applies only to those who are Torah observant; one bears no obligation to lend to Jews who are not Torah observant. (Y"D siman 251:1.) Nevertheless, as Rabbi Moshe Halevi rules, it is permissible to lend money to non-observant Jews who transgress the Torah not as an expression of rebellion or contempt for Judaism, but simply because they were not raised and educated along the path of Torah observance. By and large, all non-observant Jews nowadays fall into this category (which in Halachic terminology is called "Tinokot She'nishbu" "children who had been taken captive" and were not given a religious education). Thus, although there is no strict obligation to lend money to non-observant Jews nowadays, it is certainly permissible to do so. (See Rabbi Moshe Halevi's "Milveh Hashem," page 22.)
Summary: One who is approached by two people in need of loans should give precedence to a poor individual over a wealthy person. If both have a similar financial status, priority is given to the lender's relative; if both are either related or not related to the lender, priority is given to the lender's townsman. A Jew takes precedence over a gentile, even though the gentile offers to pay interest. The obligation to lend money does not apply to lending to non-observant Jews, though it is certainly permissible to do so.