I didn't realize Stripe had branched out into usurious lending (I clock this at about an 11% annual interest rate based on the repayment period)pic.twitter.com/2vXFs8lxT9
The light inside is broken, but I still work. The Cadillac of online bookmarking sites. Alleged nocoiner. http://pinboard.in maciej@ceglowski.com +1 415 610 0231
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I didn't realize Stripe had branched out into usurious lending (I clock this at about an 11% annual interest rate based on the repayment period)pic.twitter.com/2vXFs8lxT9
An APR isn’t directly comparable because this structure yields far less risk for the business. I elaborate here: https://news.ycombinator.com/item?id=20889376 …. As a result, 90%+ of business owners who use this rate their satisfaction 6/7 or 7/7.
Why would you expect unsatisfied business owners to use the rate in the first place? Of course the reported satisfaction level will be high when unsatisfied people don't take up the offer. You understand selection effects.
Yes; see other tweet. If a business has better options, they should pursue those — we aren’t trying to create a product that all seek to use. This exists because businesses consistently report substantial capital constraints (and credit cards are far from being a panacea).
So the somewhat oblique point of my rant is that these capital constraints for small and medium sized businesses are a disaster for tech, in that the difficulty of running a small going concern, and the ease of getting large investment for moon shots, has killed innovation
Agree! But doesn’t that argue for more rather than fewer capital products like this?
I don't see the difference between what Stripe is offering and other high-interest loans (e.g. opening a credit card). No one seems to be offering traditional small business loans (a few thousand bucks at 4-8%), perhaps linked to the grow-or-die mentality of our industry.
Difference is that our product doesn’t create the temporally fixed repayment obligations that can drive a business into bankruptcy. Repayment is instead indexed to the business trajectory, which is much safer.
How is this different from a credit card loan paid off with a fixed portion of revenue? Even distressed businesses can usually meet the minimum payment.
I think this product allows lots of businesses to share risk. The many that falter get cheaper credit paid for by the few that find more traction than they were expecting. Would it be too much to say it allows redistribution of unneeded runway?
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