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  1. #1

    Can A Company Lose Money When It Charges A 50% Interest Rate?


  2. #2
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    Very good article. 100% accurate.

  3. #3
    agreed

  4. #4
    Senior Member Reputation points: 148 Capital Stack's Avatar
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    Really a great article breaking down the numbers/details of what's involved in this industry which seems all roses. There is a risk adjusted approach to these numbers that are factored into the discount rates, which in many cases the media exploits negatively.

    Cheers to Marc Prosser of Forbes for pointing out there are many thorns with these roses.


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    Arrow 50 (Per)cent is Gangsta

    This Forbes Article seems to be incomplete.

    You absolutely can lose money while lending money at 50% interest, but I'm not sure if losing money at 50% interest (on average 6 month turns) is actually something that you can easily do... I mean you would have to actually try...

    Our very rudimentary model available for download by clicking here shows that you just about break even at 50 percent - 6 month turn - 33 percent default rate.

    For this model, we classify a default as an event where the money goes out the door, and a net $0 is collected to pay back the deal (not common). Playing with the values in row two gets you some sort of gauge as to how a guys portfolio performs based on those values. We'll turn this into a mini "web app" (Buynance loves calculators) to supplement my next eBook(let).

    I hope the writer completes the piece.

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    Quote Originally Posted by Capital Stack View Post
    Really a great article breaking down the numbers/details of what's involved in this industry which seems all roses. There is a risk adjusted approach to these numbers that are factored into the discount rates, which in many cases the media exploits negatively.

    Cheers to Marc Prosser of Forbes for pointing out there are many thorns with these roses.
    Posted my thread before seeing this one. Sorry. Feel free to merge.

    Also - I think the writer doesn't quite understand that ISO driven shops struggle to be efficient.

    That leads to a waste of time. Time is money. This can be quantified. Just our preliminary calculations are enough to make you sit up in your chair. The industry can do better.
    Last edited by JayBallentine; 10-22-2014 at 03:38 PM.

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    "Those dastardly middlemen currently weighing down returns for alternative lenders...."


    Where's Jay Ballentine when you need him....?!!!!!

  8. #8
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    I apologize Jay, that was uncalled for, but I couldn't resist .....

  9. #9
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    Quote Originally Posted by Franklin View Post
    "Those dastardly middlemen currently weighing down returns for alternative lenders...."


    Where's Jay Ballentine when you need him....?!!!!!
    No worries. We're shipping a slew of very basic; time saving services for brokers next year. First of which will allow you to remain 100% anonymous in finding out if you're competing against 88 brokers for the same file. Enough is enough. We're going to put up or shut up.

  10. #10
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    Quote Originally Posted by JayBallentine View Post
    I'm not sure if losing money at 50% interest (on average 6 month turns) is actually something that you can easily do... I mean you would have to actually try...
    I think the article is assuming 50% over 12 months, not 6.

  11. #11
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    The fact that you have to make that assumption lends credence to the fact that the article is incomplete.

  12. #12
    People are often shocked at the cost of a MCA but they never look under the hood and realize these are very high risk advances/loans and they need to have the risk priced into the cost

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