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> Just to be clear though debt is actually a preferred type of financing because it is one of the cheapest forms. Honestly? That statement seems a tad simplist
by robzyb 11y ago
> Just to be clear though debt is actually a preferred type of financing because it is one of the cheapest forms.
Honestly? That statement seems a tad simplistic to me. Especially in the context of startups.
- hguant 11y agoWhat makes a start up different than any other business?
- joshmn 11y agoThe urge to aggressively, rapidly grow.
- jjaredsimpson 11y agoThis is a distinction without difference. You could've also said, "Startups have fewer employees" for instance. How does the urge to grow separate a startup from a business in the desire to obtain low cost debt?
- robzyb 11y agoInvesting in getScale is vastly different to investing in IBM. Lending to getScale is vastly different to lending to IBM. Therefore the debt/equity argument and balance is vastly difference.
- rdlecler1 11y agoFrom a lenders perspective: Credit worthiness, free cash flow, ability to service loans, lack of collateral.
- azernik 11y agoThe big difference is that startups generally can't get bank loans on the scale they need, because the risk is so high that it's bad for the lender. If I could replace an investor with a 10% staake with a bank that I have to pay back at 8% interest, I'd take it in a heartbeat.
- aries1980 11y agoWhen the company has no liquid asset or property, the bank will use your personal assets (e.g. your house) as a security. These loans has to be continued at the year end or be paid back within a year (over-year loans have different regulations). This is what happened to me. After two years the bank didn't continue the loan because we couldn't show up 10% profit increase or 10 times of the loan in revenue, so I had 8 days to a) pay it back b) find an other bank to finance, but because the loan was in my books, and my personal assets were also the securities, it was very-very difficult to solve this situation.