A friend of mine is a loan officer. He sells money for a living. We talk from time to time about the different levels of risk and how so many merchants turn down loans because of the high-interest rate associated with the approval. First and foremost, it is prudent to shop for the best rate on a loan. You want to pay less interest. However, turning down money that can make you more money, just because the interest rate is high, is a mistake. Before I get into the why let me tell you all of the types of loans I have accepted in my days in business. I've received loans from the government as low as 1% interest. I've taken loans on money at 4-5%. I took a car loan once for 19% interest (yes, it was for business). Then, I've taken loans at 35-40% interest. Recently, the government offered a loan you don't have to pay back. That one is a real winner. I just applied for that today! Getting back to the why; Let's say you need a machine. We will call it a whichamadoodle. This whichamadoodle costs $100,000. Your local bank is not willing to give you the money. Your family says, "no way Jose." The wichamadoodle company doesn't finance. It would be best if you had this machine to do your whichamadoodle business. Now, down to the dollars. You can earn $3000 a day from this whichamadoodle that no one else has in your area, and that everyone wants. You can't get the money anywhere, so you turn to a high-risk loan company that claims to be able to get you money today. They want to loan you $100,000 for $35,000 in interest plus a loan fee of $4000. That's 39%, you tell yourself. No way, right? There is no way you can sign that deal. It's outrageous! It's highway robbery. They shouldn't even be allowed to give you money on those terms. On top of the hefty percentage, they want the money returned every day, over only 6-months! That is $1053 a day. You can't afford payments like that! Here is where your brain explodes. Your family and friends tell you that you are nuts. You start to doubt yourself. And this is where I ask you to look at your family and friends, who are likely not wealthy, tell them where to stick it, then grab the bull by its horns and ride that sucker. Without taking a risk, there is never any reward. You want your whichamadoodle, and the loan company wants their payday for believing in you when no one else will. I'm a math type of guy. If I can earn $3000 a day and have to suck it up and pay back $1000+, I'm all in. I also have balls of steel and believe in myself. I think I can take their money and make more for myself. I get to use someone else's money for my gain, and they only get a measly, one-time 39%? No investor in this world would make such a deal. Any investor in your whichamadoodle would want 80% of the take forever and make you do all of the labor. This loan company said yes to giving you $100,000 in cash today, you get to have your whichamadoodle, and you get to write off the interest on your taxes. In the business world, that is a no-brainer. I'm not perfect, but that makes perfect "cents" to me. Hopefully, you got that last part. If not, nevermind about everything I just said. My biggest advice that gets ignored all of the time is this: TAKE THE MONEY and NEVER SCREW OVER THE LENDER. You will need them again one day, I promise. Just remember to be smart and not use it to buy a Lambo. If you do that, you better be starting a Lambo rental company!
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-Lonnie Passoff
Founder and President
Green.Money (Green Payment Processing)
About the Author:
Lonnie Passoff started the first-ever internet-only electronic check processing firm in 2008. It has grown to be the largest e-check processor on the planet. A veteran of the United States Army, he has become a multi-millionaire through honest, smart business practices. He frequently speaks at business conventions and is a paid advisor to multiple corporations. He also holds a seat on the board of breast cancer non-profit, as well as a clean ocean initiative in the Caribbean.
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