Interesting thread on predatory loans. Would love to hear what folks at @stripe and @Shopify say about it. Maybe @patio11 could shed light?https://twitter.com/soundslikecanoe/status/1174721737822547969 …
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I think entrepreneurs can make their own choices and an entrepreneur with access to debt financing at low rates with strings they can live with should definitely avail themselves of it, contingent on needing the money to grow.
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If one's online business is growing at 15% a month, a) congratulations, b) you will pay a higher implicit APR from products structured this way (if you are right about growth predictions), and c) if you need the money to sustain that growth, CLEARLY TAKE IT, and if not, don't.
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A feature of these products is that you're essentially selling some downside risk to the lender. (i.e. If your business ceases growing or contracts, your repayment period will be longer over the same fixed cost and both your monthly outgoing and your implicit APR will be lower.)
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Is that going to be a great tradeoff for every entrepreneur? Probably not. If you're not just personally mortally certain of your growth rate but can convince other institutions of it easily, money will find you in abundance at very attractive terms.
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Very many entrepreneurs *don't* have financial institutions throwing them all the money. They might have personal financial circumstances which cause their credit (which these products don't need to check) to be below underwritability. They might not want personal guarantee.
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Quick anecdote: prior to working at Stripe, I asked them to build this product for 3 years running so I could use it for my SaaS company. Opinions of the easy availability of credit nonwithstanding, my profitable, six figure SaaS business racked up 8 rejections for a LoC.
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Incidentally, had one of the banks actually given me the $50k line of credit I was hoping for, the value of two days of CEO time required to get documentation together for their underwriters isn't factored into the APR they quote... but it is real, and materially moves that cost.
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