I want to ask all the touchy, feely, lefties that no doubt frequent this shop;
Did you get a look at his tax returns or schedule C?
Because if you didn't (or in the more likely case you're asking yourself "What's a schedule C?"), you're looking at a company that won't be around come 2-3 years from now.
Do you really need to see his tax returns or Sched C if all you are doing is buying a gift card for $20 that you cannot redeem until December?
ReplyDeleteI understand your point though. None of the micro loans or gift card buyers probably thought to ask why he got turned down for the loan. Could be a ton of reasons, including the bank is running scared from anything even remotely risky.
It is not a viable business model, and I think it would not work on a large scale. Also, this guy did not present his business as something that would have gone out of business without this loan.
Again, I see your point. Did any of the people that gave a microloan actually ask what the potential risks are? Did they ask about earnings, taxes, etc...? No, I doubt it.
Frankly, I would not be surprised to see more of this in the future, and is it such a bad thing? Depends on the business, and how many people are willing to take a chance with some pocket money.
So, let's see . . . he couldn't get a loan, and so did two things:
ReplyDeleteWent into debt to raise about $4500, and sold gift cards at a discount to raise another $5k.
Why in the blazes didn't he just sell the gift cards?
Oh, right, because we love debt. Can't do anything without debt. Home debt, car debt, credit card debt, student loan debt, national debt. Debt debt debt. Just ask any businessman, he'll tell you debt is a good thing.
Of course, then there are those of us who have money. Why? Because we don't do debt.
You know what you have when you don't have payments? Money.
On the other hand, having a business with a customer base so stupid as to give an unsecured loan to an unqualified borrower is pretty savvy.
Banks tend not to take into account something that every business has more or less of... I've heard it called the intangibles. That's a good a name as any. I'm sure the people who frequent the tea shop are more familiar with these properties of the business than the bank downtown. Being familiar with a person, to them, they judged the risk of 50 or 100$ worth a 10% return.
ReplyDeleteAs our recent market meltdown has showed, sometimes our financial system gets it wrong.
I haven't seen the e-mail, but there may well have been some sort of financial statement about his ability to pay back the loan should he loose all the loaned money.
Ding Ding Ding Ding Ding!
ReplyDelete"Expansion that doubled the company’s space for a tea bar and café earlier this year had cut into revenues during the busier winter months."
Smart, very shrewd. Take a struggling business and close it down during it's money making season to expand. Duh?
Where can I invest?