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> So - you can just borrow 13M and use the 13M as collatoral wouldn't OP need equivalent collateral to borrow 13M even?
by sh87 8y ago
> So - you can just borrow 13M and use the 13M as collatoral
wouldn't OP need equivalent collateral to borrow 13M even?
- darawk 8y agoNo, because he isn't spending the money. He borrows 13M, and then the 13M just sits in an account, doing nothing, or earning say, the risk-free rate. There's no risk for the lender, because the money isn't going anywhere.
- Maro 8y agoExcept if the money gets used for reimbursements/damages that the new startup bank has to pay if it's mismanaged --- that is one of the reasons the money needs to be there, I assume.
- deleted 8y ago[deleted]
- sonnyblarney 8y agoNo you get an asset worth x and use it as collateral against the loan valued as x. You'd have to pay interest on the loan, presumably from making a basic investment. It depends on what the requirements of that 13M are. But if it's just plain 'paid up capital' ... then the company could take the loan, 'owe' 13M, but then 'invest' the money back in the entity they borrowed it from! The regulators may not like this though. Depends.
- sh87 8y agoSo you'd still need an asset worth 13M. What sort of assets are acceptable these days? I ask purely out of curiosity.
- wastedhours 8y agoWouldn't "the bank itself" be the asset worth $13m? In the same buy-out as happens to a lot of sports teams, as long as you have friendly lenders, you can structure the deal to buy the asset, using the asset as the collateral (like a huuuuge car loan). If it's always going to cost $13m to get a bank shell, then (although there might not be many buyers), the bank now has a $13m "thing" which they can take ownership of if it goes down the pan.