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

[AthenaAwakened]

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

Corporations don't deserve anything. People can deserve stuff, not legal fictions.

You can agree to pay a certain rate to a corporation and then be legally held liable for that amount. But that is on you.

 

[Axulus]

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

Corporations don't deserve anything. People can deserve stuff, not legal fictions.

You can agree to pay a certain rate to a corporation and then be legally held liable for that amount. But that is on you.

Some people would say that 20.9% interest is excessive and gouging, taking advantage of desperate people. I would say it is an extremely welcome source of financing for certain situations. What say you?

 

[ZiprHead]

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

Heh heh. I'm sure the regulators will put a stop to this and give these giant banks a fine of one, maybe two dollars to make them think about what they've done.

 

[AthenaAwakened]

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

Corporations don't deserve anything. People can deserve stuff, not legal fictions.

You can agree to pay a certain rate to a corporation and then be legally held liable for that amount. But that is on you.

Some people would say that 20.9% interest is excessive and gouging, taking advantage of desperate people. I would say it is an extremely welcome source of financing for certain situations. What say you?

No one in his or her right mind (or with anywhere close to sufficient information) is going to call 20.9% of revolving debt a welcomed source of financing, particularly when the prime interest rate is 3.5%. They may need the money, and they may agree to the terms because they are in desperate enough straits, but they won't be happy about it.

 

[Axulus]

Some people would say that 20.9% interest is excessive and gouging, taking advantage of desperate people. I would say it is an extremely welcome source of financing for certain situations. What say you?

No one in his or her right mind (or with anywhere close to sufficient information) is going to call 20.9% of revolving debt a welcomed source of financing, particularly when the prime interest rate is 3.5%. They may need the money, and they may agree to the terms because they are in desperate enough straits, but they won't be happy about it.

Are you saying I'm out of my right mind? I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

 

[AthenaAwakened]

No one in his or her right mind (or with anywhere close to sufficient information) is going to call 20.9% of revolving debt a welcomed source of financing, particularly when the prime interest rate is 3.5%. They may need the money, and they may agree to the terms because they are in desperate enough straits, but they won't be happy about it.

Are you saying I'm out of my right mind?

either that or you don't have sufficient enough information.

I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

In the words of the fellas on the corner

"You got took."

Now you can tell yourself whatever it takes to get you (and your credit rating) through the night. But if you ask me for my opinion, you're probably going to get it.

 

[Axulus]

Are you saying I'm out of my right mind?

either that or you don't have sufficient enough information.

I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

In the words of the fellas on the corner

"You got took."

Now you can tell yourself whatever it takes to get you (and your credit rating) through the night. But if you ask me for my opinion, you're probably going to get it.

How did I get took? No one else was offering better financing. In terms of improvement to my life situation, this was a huge plus. I could have brought on another owner but that would've been a much worse option for me - they would've gotten substantially more than Capital One is getting, plus they would've butted in more on my and my business partners' business decisions, something neither of us wanted.

 

[ZiprHead]

I think $30k plus interest for getting in on a new very profitable business is a pretty good deal. Hell, a McDonalds franchise costs a half million (last I checked) plus another mill for the building and fixtures.

 

[Axulus]

I think $30k plus interest for getting in on a new very profitable business is a pretty good deal. Hell, a McDonalds franchise costs a half million (last I checked) plus another mill for the building and fixtures.

The cost to me was a bit more (just a little over $55k), but ~$30k of that was borrowed from credit cards.

 

[barbos]

Credit rates depend on risks. There is no risk in financing marijuana business currently, so yes 20% is too much

 

[AthenaAwakened]

either that or you don't have sufficient enough information.

I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

In the words of the fellas on the corner

"You got took."

Now you can tell yourself whatever it takes to get you (and your credit rating) through the night. But if you ask me for my opinion, you're probably going to get it.

How did I get took? No one else was offering better financing. In terms of improvement to my life situation, this was a huge plus. I could have brought on another owner but that would've been a much worse option for me - they would've gotten substantially more than Capital One is getting, plus they would've butted in more on my and my business partners' business decisions, something neither of us wanted.

Here's the thing, since this business of yours is such a roaring success, where and what was the risk for Capital One? What information were they looking at that you weren't?

 

[JonA]

Credit rates depend on risks. There is no risk in financing marijuana business currently,

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

 

[jonatha]

Credit rates depend on risks. There is no risk in financing marijuana business currently,

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

And I am wondering at what point Capital One, the eighth largest bank holding company in the United States, might run into trouble over this...

 

[Nice Squirrel]

Credit rates depend on risks. There is no risk in financing marijuana business currently,

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

They cannot finance it due to money laundering laws.

Axulus, congratulations on getting in on the ground of this profitable business. It was a wise move.

 

[Axulus]

either that or you don't have sufficient enough information.

I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

In the words of the fellas on the corner

"You got took."

Now you can tell yourself whatever it takes to get you (and your credit rating) through the night. But if you ask me for my opinion, you're probably going to get it.

How did I get took? No one else was offering better financing. In terms of improvement to my life situation, this was a huge plus. I could have brought on another owner but that would've been a much worse option for me - they would've gotten substantially more than Capital One is getting, plus they would've butted in more on my and my business partners' business decisions, something neither of us wanted.

Here's the thing, since this business of yours is such a roaring success, where and what was the risk for Capital One? What information were they looking at that you weren't?

First of all, Capital One has no clue I was using the personal lines of credit they granted me to start my own recreational marijuana shop.

Second of all, there was a reasonable amount of risk that the business

(1) would have been much more expensive to open than originally anticipated, raising the risk of a credit default
(2) could not be opened at all - we had a competitor down the road 500 feet from us try to shut us down before we got our license. His dirty trick? Opening up an arcade that was open to minors right next to his own shop (he owned the building). The state law says they can not grant a license to any shop that is located within 1,000 feet of an arcade situation. This was a serious issue for us that was ultimately rectified by the city passing an emergency ordinance reducing the buffer down to 100 feet for those businesses that already have a permit with the city to open but do not yet have their state license (an option allowed for cities with the new state law passed in June). (The news did a story on it here: http://www.king5.com/story/news/loc...s-arcades-to-open-next-to-pot-shops/75250382/
(3) Any other number of regulatory issues could have occurred preventing or delaying our opening

- - - Updated - - -

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

They cannot finance it due to money laundering laws.

Axulus, congratulations on getting in on the ground of this profitable business. It was a wise move.

Thanks

- - - Updated - - -

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

And I am wondering at what point Capital One, the eighth largest bank holding company in the United States, might run into trouble over this...

These were personal lines of credit - they did not directly finance the business.

 

[Blahface]

Yes there is: it's an illegal business according to the federal government.

Any public bank openly financing such an operation would be taking a huge risk.

They cannot finance it due to money laundering laws.

Axulus, congratulations on getting in on the ground of this profitable business. It was a wise move.

It might not be if the Republicans win the White House. The only reason the pot dispensaries are running is because Obama decided he is not going to enforce federal law.

 

[AthenaAwakened]

either that or you don't have sufficient enough information.

I didn't need the money in the sense of needing it for survival, but I needed it to improve my situation and get my business started. The terms of which were quite fair in relation to the expected benefit to myself from this business, both in terms of expected financial return and in terms of substantially increasing my job satisfaction.

In the words of the fellas on the corner

"You got took."

Now you can tell yourself whatever it takes to get you (and your credit rating) through the night. But if you ask me for my opinion, you're probably going to get it.

How did I get took? No one else was offering better financing. In terms of improvement to my life situation, this was a huge plus. I could have brought on another owner but that would've been a much worse option for me - they would've gotten substantially more than Capital One is getting, plus they would've butted in more on my and my business partners' business decisions, something neither of us wanted.

Here's the thing, since this business of yours is such a roaring success, where and what was the risk for Capital One? What information were they looking at that you weren't?

First of all, Capital One has no clue I was using the personal lines of credit they granted me to start my own recreational marijuana shop.

Second of all, there was a reasonable amount of risk that the business

(1) would have been much more expensive to open than originally anticipated, raising the risk of a credit default
(2) could not be opened at all - we had a competitor down the road 500 feet from us try to shut us down before we got our license. His dirty trick? Opening up an arcade that was open to minors right next to his own shop (he owned the building). The state law says they can not grant a license to any shop that is located within 1,000 feet of an arcade situation. This was a serious issue for us that was ultimately rectified by the city passing an emergency ordinance reducing the buffer down to 100 feet for those businesses that already have a permit with the city to open but do not yet have their state license (an option allowed for cities with the new state law passed in June). (The news did a story on it here: http://www.king5.com/story/news/loc...s-arcades-to-open-next-to-pot-shops/75250382/
(3) Any other number of regulatory issues could have occurred preventing or delaying our opening

But if Cap One did not know you were opening a head shop, then none of these risks would apply to your loan rate, making them irrelevant.

Ya got took.

Don't feel bad, you weren't the first and you won't be the last.

 

[Alcoholic Actuary]

I am the owner of a recreational retail cannabis shop. There was absolutely no traditional bank financing available for my start-up business expenses. However, one thing I did have was good personal credit. As a result, I qualified for approximately $30,000 total credit limit with credit cards, the bulk of which was made available by Capital One. I have been a customer of Capital One for about 10 years. Despite my credit trends worsening as I nearly maxed out my limits and made only the absolute minimum payments, not once did they question my borrowing and payment habits or threaten to reduce my credit.

When I first signed up for additional cards about a year and a half ago, they offered me interest free financing for 12 months. I was able to take full advantage of that generous offer to afford all the expenses that go into opening up a retail business in this industry. I am now being charged average interest rates of 20.9% on my outstanding balances, but the income I am generating is allowing me to pay off the credit cards rapidly. I'll be credit card debt free probably around sometime in April or May. Capital One deserves every penny of interest they have charged me. Without their generous credit offer it would not have been possible to start my business, which has dramatically improved my happiness and financial situation. They were willing to stick with me, and the income I am now generating more than makes up for the financing terms they offered.

Not only that, but previously I earned a lot of cash back rewards and never payed a dime of interest. I will be going back into that situation soon where I am the one getting paid to use their credit cards.

Is the interest that Captial One charging me fair? I absolutely think so. Let's not forget that the average interest rate is quite a bit lower given the 12 months of free financing they provided. I am so grateful to them for the offer and opportunity they have provided me.

https://www.casact.org/professionalism/standards/princip/sppcrate.pdf

"Principle 4: A rate is reasonable and not excessive, inadequate, or unfairly discriminatory if it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer."

The question of fairness really surrounds Capital One's estimate of default and consequent loss for the type of loan issued. That is both an aggregate and individual assessment. And what did you estimate your probability of failure to be? 15%-20% and I would consider a 20+% interest rate fair. Most of the time, however, market interest rates are nowhere near "fair" but people will take what they can get. From my personal perspective:

1) Congrats on the new endeavor and best of luck.
2) I agree that it is far better to pay a 20% interest rate on a loan - and hopefully pay it off early, than to sell equity to someone uninterested in the labor and commitment to a successful new business.

aa

 

[JonA]

First of all, Capital One has no clue I was using the personal lines of credit they granted me to start my own recreational marijuana shop.

Second of all, there was a reasonable amount of risk that the business

(1) would have been much more expensive to open than originally anticipated, raising the risk of a credit default
(2) could not be opened at all - we had a competitor down the road 500 feet from us try to shut us down before we got our license. His dirty trick? Opening up an arcade that was open to minors right next to his own shop (he owned the building). The state law says they can not grant a license to any shop that is located within 1,000 feet of an arcade situation. This was a serious issue for us that was ultimately rectified by the city passing an emergency ordinance reducing the buffer down to 100 feet for those businesses that already have a permit with the city to open but do not yet have their state license (an option allowed for cities with the new state law passed in June). (The news did a story on it here: http://www.king5.com/story/news/loc...s-arcades-to-open-next-to-pot-shops/75250382/
(3) Any other number of regulatory issues could have occurred preventing or delaying our opening

But if Cap One did not know you were opening a head shop, then none of these risks would apply to your loan rate, making them irrelevant.

Ya got took.

Don't feel bad, you weren't the first and you won't be the last.

You're really missing the point.

Interest rates are determined partially by risk. If you want a lower-interest business loan, then you have to tell the bank everything about your business and let them analyze and calculate risks, etc. to come up with an interest rate for the loan. The riskier the business, the higher the interest; and at some point the bank won't even make the deal - such as in financing marijuana shops.

In Axulus' case, Capital One didn't know what he was using the money for and it is precisely that reason - that it was a personal loan for god-knows-what - that the bank charged higher interest than they would've on a business loan where they'd calculated out all the relevant risks, etc.

Axulus didn't 'get took' by Capital One; he got took by the murky legal status of marijuana vending and the increased risks and difficulty in assessing those risks that goes along with that. Yeah, he had to pay higher interest on a what the bank rightly considered a riskier loan than if there had been no legal grey areas and he could have just asked the bank for a business loan. In general, though, he seems to be happy that at least these loans were available to him and is glad that there are banks that will throw you money without questioning what you're going to use it on - even if they charge an understandably higher interest rate for doing so.

 

[AthenaAwakened]

But if Cap One did not know you were opening a head shop, then none of these risks would apply to your loan rate, making them irrelevant.

Ya got took.

Don't feel bad, you weren't the first and you won't be the last.

You're really missing the point.

Interest rates are determined partially by risk. If you want a lower-interest business loan, then you have to tell the bank everything about your business and let them analyze and calculate risks, etc. to come up with an interest rate for the loan. The riskier the business, the higher the interest; and at some point the bank won't even make the deal - such as in financing marijuana shops.

In Axulus' case, Capital One didn't know what he was using the money for and it is precisely that reason - that it was a personal loan for god-knows-what - that the bank charged higher interest than they would've on a business loan where they'd calculated out all the relevant risks, etc.

Axulus didn't 'get took' by Capital One; he got took by the murky legal status of marijuana vending and the increased risks and difficulty in assessing those risks that goes along with that. Yeah, he had to pay higher interest on a what the bank rightly considered a riskier loan than if there had been no legal grey areas and he could have just asked the bank for a business loan. In general, though, he seems to be happy that at least these loans were available to him and is glad that there are banks that will throw you money without questioning what you're going to use it on - even if they charge an understandably higher interest rate for doing so.

I am not missing the point.

The OP asked a question. I took issue with the word deserve. He then asked

Some people would say that 20.9% interest is excessive and gouging, taking advantage of desperate people. I would say it is an extremely welcome source of financing for certain situations. What say you?

I say he got took. If this makes it clearer, he got gouged. He asked my opinion and I gave it. He thinks he got a good deal, I think he got took. I disagree with him. Disagreeing with someone doesn't mean you didn't understand him. It means you don't agree with him.