How much does Capital One deserve for providing me the financing needed for the start-up costs to open my business?

[Horatio Parker]

You're a CPA, have a business, need less than $30k, but can't get it for less than 20%?

Seems strange to me, but then again I'm not in business.

 

[ZiprHead]

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

 

[Horatio Parker]

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

Sounds like a business opportunity.

 

[Loren Pechtel]

While Dave Ramsey would not be proud of his actions that doesn't mean it wasn't a reasonable risk to take.

dave Ramsey is a full of shit moron who knows nothing about finance. Anyone who listens to his stupid advice deserves to remain a loser. You need capital. Borrowing is the easiest and cheapest way to do so. To suggest that you have to work first and save it up is insane. Business opportunities don't wait around.

As for the OP, you don't owe Capital One anything more than what you've agreed to by contract. And if the contract doesn't prohibit it, you should see about other alternatives to pay it off at cheaper rates from other cards. You're a businessman, not a charity for banks who are nice to you. There are hundreds of ways to seriously reduce your interest exposure and you should do so.

SLD

Dave Ramsey's advice is reasonable for those who aren't careful about credit.

Borrowing in a business realm is a very different issue, though. Sometimes it's the right thing to do.

 

[Loren Pechtel]

On another note, I've become leery (past that point actually) of time-sensitive opportunities. Good deals that seem unlikely that'll come around soon are rarely not right around the corner.

This is a special case--reacting to a change in the legal climate.

- - - Updated - - -

I shopped around and Capital One offered the best deals - the interest rates I qualified for got worse as I opened additional cards, but the 12 months free interest means the average rate I pay overall isn't that bad. The 2% cash back card is the one I will continue to use regularly and pay off at the end of every month. This is the best cash back deal I have found. I'm just really glad this option was available when I needed it.

I have no intention of paying them any kind of bonus other than perhaps giving the company a good review.

Capital One has a 2% card? I wasn't aware of it. What card?

- - - Updated - - -

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

Yup. The Feds like to rob the state-legal MJ businesses. I suspect the banks are leery of getting robbed for being part of it.

 

[Horatio Parker]

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

Yup. The Feds like to rob the state-legal MJ businesses. I suspect the banks are leery of getting robbed for being part of it.

Really? Got any links?

When I looked, I found this from a year ago:

http://www.medscape.com/viewarticle/837011

Federal agents will no longer be able to raid medical marijuana dispensaries in states where medical marijuana is legal under a provision included in the $1.1 trillion spending law President Obama signed December 16.

Enactment of the law changes a two-decade-long battle between the states and the federal government. Although 32 states and the District of Columbia have legalized medical marijuana, the Drug Enforcement Administration still classifies it as a Schedule I drug, the same class as heroin, LSD, and ecstasy, which signifies it has no accepted medical use and a high potential for abuse.

Before this law, the Justice Department could shut down dispensaries that states legally opened, although under the Obama Administration the department had kept its distance.

 

[Axulus]

Capital One has a 2% card? I wasn't aware of it. What card?

https://www.capitalone.com/credit-c...ps://www.capitalone.com/credit-cards/business

The 2% one does have an annual fee of $59, but it becomes superior if you spend at least $12,000 on it for the year (covers the $59 fee plus exceeds the cash back on a 1.5% card). Additionally, and I had forgotten about this, but they provided me a 1 time $500 cash back reward when I had spent $4,500 after 3 months.

Yup. The Feds like to rob the state-legal MJ businesses. I suspect the banks are leery of getting robbed for being part of it.

It hasn't happened in awhile. Additionally, no recreational shop has been raided yet in all the states they are legal and have opened (Colorado, Washington)

 

[Axulus]

You're a CPA, have a business, need less than $30k, but can't get it for less than 20%?

Seems strange to me, but then again I'm not in business.

Not for unsecured credit at the level of credit I was needing.

I focused on cash back rewards on the cards I had opened years ago and payed no attention to the interest rate. By the time I needed to open additional cards, I tended to only qualify for ones with the higher interest rate levels (that also offered 12 months interest free).

 

[Axulus]

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

Correct, which limited my financing options. All the financial projections I had done indicated that opening one up in the area I live in should be quite profitable. However, no bank will lend to them for the reason you mention as well as it being very difficult to secure the loan - the bank is not allowed by state law to take possession of our inventory and liquidate it in the event that we default.

There are a few select credit unions that are opening bank accounts for this industry (which we thankfully qualified for and got accepted through their application process), but no loans.

- - - Updated - - -

Banks generally will not deal with cannabis based businesses. They may be legal locally or in a state but MJ is still illegal federally. No bank will finance an MJ business. I've heard they won't even make accounts for revenues from the business.

Sounds like a business opportunity.

Yes - there are a few businesses popping up that are offering banking services, plus some credit unions taking on accounts.

This is one of them but their fees are rather high:

http://www.payqwick.com/#!for-businesses/iz7de

The Federal Dept. of the Treasury released a memo giving the green light for financial institutions that want to open accounts for this industry, but they must follow strict guidelines. Almost every bank is too conservative to go for it:

https://www.fincen.gov/statutes_regs/guidance/pdf/FIN-2014-G001.pdf

 

[Axulus]

dave Ramsey is a full of shit moron who knows nothing about finance. Anyone who listens to his stupid advice deserves to remain a loser. You need capital. Borrowing is the easiest and cheapest way to do so. To suggest that you have to work first and save it up is insane. Business opportunities don't wait around.

As for the OP, you don't owe Capital One anything more than what you've agreed to by contract. And if the contract doesn't prohibit it, you should see about other alternatives to pay it off at cheaper rates from other cards. You're a businessman, not a charity for banks who are nice to you. There are hundreds of ways to seriously reduce your interest exposure and you should do so.

SLD

Dave Ramsey's advice is reasonable for those who aren't careful about credit.

Borrowing in a business realm is a very different issue, though. Sometimes it's the right thing to do.

Dave Ramsey fails to consider the benefits of credit in the following scenarios:

-When used for investment purposes where the risk-adjusted expected return on the investment greatly exceeds the cost of the cheapest available credit

-When used to purchase long-term assets using low interest rates, allowing one's annual consumption to remain more even over a lifetime, where it is typically the case that one's earnings at the beginning of their career are much lower than later in their career. Borrowing for such long-term assets allows one to consume more when they are younger and then pay it back when their income is much higher, allowing their consumption patterns to remain far more balanced.

 

[fast]

-When used for investment purposes where the risk-adjusted expected return on the investment greatly exceeds the cost of the cheapest available credit

How does one adjust for risk? Thinking out loud: If the owner of a check cashing company knows that certain kinds of checks will more often uncollectably bounce and thus bring more financial loss, he could adjust for the added risk of cashing those checks by raising the fee to cash those certain kind of checks thereby compensating for the net negative effect on the expected return on investment. However, that is adjusting for risk with pricing. How does one adjust for what seems to me to be a very different kind of risk?

 

[Horatio Parker]

You're a CPA, have a business, need less than $30k, but can't get it for less than 20%?

Seems strange to me, but then again I'm not in business.

Not for unsecured credit at the level of credit I was needing.

I focused on cash back rewards on the cards I had opened years ago and payed no attention to the interest rate. By the time I needed to open additional cards, I tended to only qualify for ones with the higher interest rate levels (that also offered 12 months interest free).

So you're not paying anything like 20%. What's your effective rate?

 

[ZiprHead]

Hey Ax. Best of luck to you in your new venture!

 

[JonA]

20.9% on average. He said, "I am now being charged [...]."

The net effect of being paid cash back rewards and paying no interest.

I think I've reconciled the discrepancy. It's tricky.

Oh yes, the card companies will still make money by charging merchants even if they pay out some of that money to card users.

The card company is not the same as the bank that lends out the money.

 

[TV and credit cards]

Well, good luck to you sir. You are making a lot of people happy.

Correct me if I'm wrong; you have to pay federal taxes on this illegal business but you cannot deduct any business expenses because your business is illegal?

 

[Loren Pechtel]

https://www.capitalone.com/credit-c...ps://www.capitalone.com/credit-cards/business

The 2% one does have an annual fee of $59, but it becomes superior if you spend at least $12,000 on it for the year (covers the $59 fee plus exceeds the cash back on a 1.5% card). Additionally, and I had forgotten about this, but they provided me a 1 time $500 cash back reward when I had spent $4,500 after 3 months.

Oh, that's why I wasn't aware of it. I normally disregard all cards with annual fees. I have a 2% card (Priceline) but more than once I've had my best reward card become not so good, I always like to keep an eye out for other options.

 

[Axulus]

Not for unsecured credit at the level of credit I was needing.

I focused on cash back rewards on the cards I had opened years ago and payed no attention to the interest rate. By the time I needed to open additional cards, I tended to only qualify for ones with the higher interest rate levels (that also offered 12 months interest free).

So you're not paying anything like 20%. What's your effective rate?

By the time everything is paid off, it's going to be somewhere around 10-11% from the time the money was borrowed.

- - - Updated - - -

Hey Ax. Best of luck to you in your new venture!

Thank you very much!

 

[Axulus]

-When used for investment purposes where the risk-adjusted expected return on the investment greatly exceeds the cost of the cheapest available credit

How does one adjust for risk? Thinking out loud: If the owner of a check cashing company knows that certain kinds of checks will more often uncollectably bounce and thus bring more financial loss, he could adjust for the added risk of cashing those checks by raising the fee to cash those certain kind of checks thereby compensating for the net negative effect on the expected return on investment. However, that is adjusting for risk with pricing. How does one adjust for what seems to me to be a very different kind of risk?

Adjusting for risk just means that you have to add in the factor for risk when looking at your expected returns. This just means that you have to adjust your required return upward the riskier an investment is to make it worth investing in compared to a less risky one.

A person is willing to accept a lower return on their investment when they invest in something like a US treasury bond, which is very low risk, vs. an ownership stake in a business, which is a very risky asset.

 

[Axulus]

Well, good luck to you sir. You are making a lot of people happy.

Thank you

Correct me if I'm wrong; you have to pay federal taxes on this illegal business but you cannot deduct any business expenses because your business is illegal?

Not just any illegal business, but a business that traffics in a schedule I substance (marijuana being one of them) as per Sec. 280e of the tax code. It severely limits what expenses we can deduct, but it doesn't make everything non-deductible. We can deduct our cost of goods sold (what we paid to acquire the product). We can also allocate a portion of the rest of our expenses to our paraphernalia side of the business (glass pipes, accessories, lighters, etc.) - a percentage of our rent, payroll, utilities, etc. can be said to go against this (the details on how much we can allocate are complicated, so I won't go into them).

 

[ksen]

Banks generally will not deal with cannabis based businesses.

https://www.google.com/webhp?source...espv=2&ie=UTF-8#q=banks laundering drug money