It’s going to cost how much!!! You must be crazy!!!
That comment is made by entrepreneurs and business owners after hearing how much it costs to borrow money from either a mid market or private lender. The comment is usually followed by a series of expletives that I won’t type here but needless to say the cost of capital is something that can scare or upset someone who maybe hasn’t thought through the opportunity cost (see past blog post here). There is no such thing as free money when it comes to business but more importantly the money your business is using has a cost to it that you may never have thought about but you might want to.
“…the loss of potential gain from other alternatives when one alternative is chosen.”
Running a business comes with an never ending series of trade offs and there are times when critical decisions need to be made that seem to have greater trade offs than what you may be accustom to. This can be particularly agonizing when a decision involves needing expertise that you may not have access to – like financing. When given an opportunity to profit from a decision that involves needing to find capital, often times entrepreneurs and business owners will either lean in and commit or miss the opportunity as a result of their lack of knowledge. Opportunity cost is a real concept that impacts many businesses but here are some things that might help you if you find yourself in a position where a gain to your business will involve being creative with how you find the capital to take advantage of it. Continue reading “What is opportunity cost?”→
It’s going to cost a lot. By a lot I mean more than usual. Your expectation will be that it will not cost a lot only to realize that the interest rate is high and the fees are ridiculous. You would find yourself in this situation if you needed money and the 11th hour was approaching with no money in sight. At the last moment, a lender comes along and provides you with the money without reviewing the mountain of paperwork you have and makes a decision to advance funds based entirely on their experience, knowledge and comfort with the security you are offering for the money. Who finds themselves in this situation? Many people do and here is what some of the reasons are. Continue reading “It’s going to cost how much? Is that even legal?”→