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Old 03-01-2022, 04:46 AM
 
408 posts, read 291,522 times
Reputation: 306

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Not that anyone should ever land themselves in this situation, but we have a small business and we purchase raw foods wholesale, then we prepare and cook them, then we sell the food as meal deliveries .

The business does reasonably well and has good and lousy seasons of the year. Sometimes we hold an inventory and One of the wholesalers HAD allowed us to have a balance owed that we don’t have to pay down to 0 right away but within month’s end and this policy was tolerated for most of last year until Wholesale prices climbed sharply and amounts owed got more serious

One day a letter came out of surprise “you will need to pay this balance in full in 48 hours or your client relationship will be terminated immediately… and a 50% markup will be added to your balance in penalty every 7 days … we are not a bank … you must pay your balances in full if you want to stay with us.


Well we ran into a serious timing conflict and looked at business loaners . One offers a 3-month term loan for $10,000 but surcharges $3,800 as the cost of borrowing , that’s 38 cents on the dollar , He insisted that’s not the same thing as an APR because the $3,800 is due immediately . You would receive actually $9,700 because of admin feees and owe $13,800 amount financed … due in 90 days, and can borrow up to $150K . There’s no deciding how to pay back as they weekly automate the payments coming out and if you run to below 0 then the only perk is that interest rate after $13,800 is a slightly lower APR 15%

That’s farrrrr more penalty than any charge card I ever had

Unsecured personal loans are by the month , 10%-ish interest and can be extended to 36-60 months
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Old 03-01-2022, 05:01 AM
 
408 posts, read 291,522 times
Reputation: 306
So basically a $10,000 loan is really a $13,800 loan but you owe $3,800 as a down payment immediately is how they work but it doesn’t reduce the balance from $13,800 to 10K as it’s penalty not principal

Last edited by Freesponge; 03-01-2022 at 05:12 AM..
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Old 03-01-2022, 05:50 AM
 
5,907 posts, read 4,437,090 times
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Technically, it’s not APR because it’s not outstanding but that’s an irrelevant distinction in terms of your actual cost in that it functions exactly like as outrageous interest rate. “Ask the loan shark if today is a good day to get loan sharked.”

Also, if that vendor actually wrote a message with that tone and aggressiveness, it’s probably time to “fire” then.
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Old 03-01-2022, 06:29 AM
 
8,005 posts, read 7,234,235 times
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The greater the risk, the higher the reward must be to take on that risk. As a lender, I would not touch this loan for any amount of fees and interest. You mentioned credit cards. If they are cheaper for a cash advance why not go that route?
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Old 03-01-2022, 06:38 AM
 
24,613 posts, read 10,936,326 times
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Quote:
Originally Posted by Freesponge View Post
So basically a $10,000 loan is really a $13,800 loan but you owe $3,800 as a down payment immediately is how they work but it doesn’t reduce the balance from $13,800 to 10K as it’s penalty not principal
You are running a somewhat seasonal business using delayed payments to finance it and the "bank" pulled out from under you.
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Old 03-01-2022, 07:50 AM
 
9,872 posts, read 7,750,913 times
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Are you unable to put the balance on a credit card? Or savings? Are you maxed out?

Do you have a merchant account? You may be able to get a working capital loan from them. All of these loans are expensive. I get at least 15 emails and 3 calls a day from these companies.

You have to pay your suppliers somehow, they're right, they're not a bank. If you need to get one of those high cost loans to get out of the jam, take it as a lesson learned and figure out how to earn more money so you don't get caught again. Good luck.
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Old 03-01-2022, 09:11 AM
 
Location: Bergen County, NJ
4,031 posts, read 3,648,437 times
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If it’s a short term cash flow need as you describe, look into a business line of credit. The rate will be variable but you should be able to do much better than 15% APR.
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Old 03-02-2022, 06:41 AM
 
17,351 posts, read 22,090,465 times
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Quote:
Originally Posted by Freesponge View Post

One day a letter came out of surprise “you will need to pay this balance in full in 48 hours or your client relationship will be terminated immediately… and a 50% markup will be added to your balance in penalty every 7 days … we are not a bank … you must pay your balances in full if you want to stay with us.


Well we ran into a serious timing conflict and looked at business loaners . One offers a 3-month term loan for $10,000 but surcharges $3,800 as the cost of borrowing , that’s 38 cents on the dollar , He insisted that’s not the same thing as an APR because the $3,800 is due immediately . You would receive actually $9,700 because of admin feees and owe $13,800 amount financed … due in 90 days, and can borrow up to $150K . There’s no deciding how to pay back as they weekly automate the payments coming out and if you run to below 0 then the only perk is that interest rate after $13,800 is a slightly lower APR 15%

That’s farrrrr more penalty than any charge card I ever had

Unsecured personal loans are by the month , 10%-ish interest and can be extended to 36-60 months
Bold part seems unbelievable. The 50% penalty is likely against the law.

The loan terms are going to eat up (no pun intended) your profits. So you can work to earn nothing OR go out of business to earn nothing. I'd go choice B.........the business is not sustainable.
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Old 03-02-2022, 07:12 AM
 
9,872 posts, read 7,750,913 times
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Quote:
Originally Posted by City Guy997S View Post
Bold part seems unbelievable. The 50% penalty is likely against the law.

The loan terms are going to eat up (no pun intended) your profits. So you can work to earn nothing OR go out of business to earn nothing. I'd go choice B.........the business is not sustainable.
I agree it's probably against the law and they probably know they will never collect it. But it sure sounds like the supplier is beyond angry and frustrated because the OP hasn't paid the invoices. The supplier has to eat too.
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Old 03-02-2022, 08:56 AM
 
Location: North Idaho
32,668 posts, read 48,104,757 times
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Should I assume that you first tried to get a loan from the bank and they said "no way, you are too much risk"? So then you went to private money and they want to be paid for the amount of risk they are taking by letting you use their money.


Hard money lenders are expensive and they charge high fees and high interest because the debt is not particularly well secured.


If your credit score is decent, you should be able to put that amount onto your credit card instead of borrowing from a hard money lender.


I'm also going to assume that you haven't been making your required payments to your supplier or otherwise they wouldn't have cut you off. If you are in the habit of not paying your debts in a timely manner, you can't borrow more money at a low rate. That's just the way the world turns. Almost every business that allows the running of a tab expects all of that tab to be paid within 30 business days. (if they are generous. I do business with some places that want payment in 15 days)
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