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Yeah, sure. Just seems like paying a bank 20-30% per year is a way better deal than slowly bleeding 200-400% back to Earnest. You're paying WAY more money (read
by a13n 8y ago
Yeah, sure. Just seems like paying a bank 20-30% per year is a way better deal than slowly bleeding 200-400% back to Earnest. You're paying WAY more money (read: 10x) for a more flexible payment schedule.
- nkohari 8y agoAt the stage in which they're investing, a bank loan will generally be secured against your personal assets, whereas the money from Earnest is not. If you raise money from Earnest and your business fails, Earnest loses their investment. If you raise money from a bank and your business fails, you may lose your house or declare bankruptcy.
- robhunter 8y agoI don't think you understand how interest rates work. If you look at the repayment schedule in the model, you'll find that Earnest ends up being CHEAPER than 20-30% without the personal guarantees required by a bank: https://docs.google.com/spreadsheets/d/1h_L7oa3rbV8P-ZnMM-l1fY5zc97GetYkRjQ_zCi6by4/edit#gid=0 https://docs.google.com/spreadsheets/d/1h_L7oa3rbV8P-ZnMM-l1... A stream of cash flows that goes: 0: -150,000 1: 0 2: 0 3: 1,800 4: 14,400 5: 50,400 6: 97,200 7: 205,200 8: 81,000 The IRR/effective "interest rate" of this stream of cash flows is 18.3% - lower than the 20%-30% you're claiming.
- deleted 8y ago[deleted]