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I've probably missed something, but for how long does the borrower have to pay 9% of their sales? Is the debt paid in full once $15k (+interest?) is paid back? What is that interest rate?
There is no interest, you just have to pay back the fixed fee.
Earlier quoted context omitted.
Any transaction of money in exchange for time is interest.
But religion, unlike laws, thrives on technicalities. Some Jews won't push a button in an elevator on the Sabbath, but it's fine if its programmed to stop at every floor.
Earlier quoted context omitted.
It took you less than 30 mins from the time this was posted to calculate the APR for two possible repayment schemes and compare that to loans available elsewhere. I'm not seeing the problem. I think it's fair to presume that businesses in the market for a loan will be at least as capable of understanding the loan structure as you, some internet commenter with no personal financial interest in the issue, were with les…
>I think it's fair to presume that businesses in the market for a loan will be at least as capable of understanding the loan structure as you, some internet commenter with no personal financial interest in the issue, were with less than a half hour of time. This is not true in my experience. A lot of people just wing it through life without doing or being able to do any calculations. Not that it excuses them.
The way Stripe Capital has structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders, which typical express their fees through APRs. The term of the loan is variable, and depends on daily sales, but assuming you have a high volume of sales and take out a small loan, the effective APR is going to be through the roof! For instance, supp…
[Stripe cofounder.] > But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee. Yes, this is right -- if your business suddenly s…
The way Stripe Capital has structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders, which typical express their fees through APRs. The term of the loan is variable, and depends on daily sales, but assuming you have a high volume of sales and take out a small loan, the effective APR is going to be through the roof! For instance, supp…
It seems a bit as though the model is set up for independent operators and 'Mum & Pop' shops that use Stripe but don't have the business acumen to see the issue. Or, people who have a good history of selling with Stripe, but, lack the credit rating, history or collateral to use other lenders. It's a very carefully and cleverly thought out payment model, which leads me to believe they knew exactly which consumer base…
Earlier quoted context omitted.
[Stripe cofounder.] > But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee. Yes, this is right -- if your business suddenly s…
In this case, then surely showing a calculator straight on the page allowing people to see what APR they would get based on their payment/sales configuration would make the whole process more transparent and easier to understand by people who might not be savvy enough to understand the nuances then?
I wonder what the effective interest rate will be.
Edit:
I meant "merchant cash advance"
Reminds me of this article:
How Two Guys Lost God and Found $40 Million https://www.bloomberg.com/news/features/2015-10-06/how-two-g...