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

[ksen]

If your effective rate, after all the doodads and whizbang marketing tactics, is around 10% why doesn't Capital One just do away with the doodads and whizbang marketing tactics and just charge around 10%.

I'm thinking they're betting on most people not being as savvy as you are when it comes to assessing credit offers.

So while it was a good deal for you I think it would be a horrible deal for most others.

 

[JonA]

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.

Okay.

Well opinions can be wrong.

In this case yours is.

 

[laughing dog]

Okay.

Well opinions can be wrong.

In this case yours is.

That is certainly a convincing argument.

 

[AthenaAwakened]

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.

Okay.

Well opinions can be wrong.

In this case yours is.

Like I said,

 

[Harry Bosch]

Seems high to me, but what do I know about credit rates. Did you consider venture capital? Might that have been cheaper?

VC would be far more expensive as it would require giving up ownership shares. Usually VCs are looking at $1,000,000 minimum injection.

 

[Harry Bosch]

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.

Yes, banks won't work with cannabis businesses due to federal regulations. Most banks can't even take their deposits.

 

[Harry Bosch]

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.

Banks also rarely finance startup businesses unless there is some kind of economic development guaranty, substantial equity, and very experienced management.

 

[TV and credit cards]

If your effective rate, after all the doodads and whizbang marketing tactics, is around 10% why doesn't Capital One just do away with the doodads and whizbang marketing tactics and just charge around 10%.

I'm thinking they're betting on most people not being as savvy as you are when it comes to assessing credit offers.

So while it was a good deal for you I think it would be a horrible deal for most others.

As I mentioned in a previous post. The minimum payment folks subsidize those who can pay back in short order. Minimum payment is for all intents and purposes, for those who had no business asking for credit in the first place.

Trove Cannabis

 

[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

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.

View attachment 5219

And your advice to someone in my situation seeking financing to start their business would've been what? "Don't go for those credit cards, you'll get taken, either find something else or don't open up the business."?

- - - Updated - - -

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.

Thank you, you said it better than I could have.

 

[Axulus]

If your effective rate, after all the doodads and whizbang marketing tactics, is around 10% why doesn't Capital One just do away with the doodads and whizbang marketing tactics and just charge around 10%.

I'm thinking they're betting on most people not being as savvy as you are when it comes to assessing credit offers.

So while it was a good deal for you I think it would be a horrible deal for most others.

My guess: other companies will offer 0% interest free financing for 12 months and they'll get more sign-ups that way and Capital One will get fewer.

 

[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.

View attachment 5219

And your advice to someone in my situation seeking financing to start their business would've been what? "Don't go for those credit cards, you'll get taken, either find something else or don't open up the business."?

No. What makes you think that? You asked about a rate you paid on money you borrowed. Not you business acumen, not you worthiness as a human being, not whether or not you wasted your life. One decision that you say you made the best of. If that were me, I would be bragging to the high heavens about how IN SPITE OF the usurious rate I was charged I STILL made a success of my venture. But that isn't what this is about, is it? This is about justifying the banks and credit card companies charging outrageous rates, and how consumers need to just suck it up and pay whatever is demanded, is it not? And if it isn't, pray tell what rate of interest would you ever find simply too high?

- - - Updated - - -

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.

Thank you, you said it better than I could have.

 

[ksen]

If your effective rate, after all the doodads and whizbang marketing tactics, is around 10% why doesn't Capital One just do away with the doodads and whizbang marketing tactics and just charge around 10%.

I'm thinking they're betting on most people not being as savvy as you are when it comes to assessing credit offers.

So while it was a good deal for you I think it would be a horrible deal for most others.

My guess: other companies will offer 0% interest free financing for 12 months and they'll get more sign-ups that way and Capital One will get fewer.

Probably with a condition in extremely small print that says if you are late one time all that interest free money will suddenly get hit with their 24.9% rate plus other charges.