New bill to restrict loan shops and payday loan rates ? problem in business ?
New bill to restrict loan shops and payday loan rates ? problem in business ?
You have just defended the payday loan companies by saying their fees, from which
they generate their ... With loans to a company, there are the regular payments, and
there are additional ... If the business does poorly, the bank doesn't get much. ...
Profit is not the same as interest.
For example, on the mortgage, tbe bank buys a house and sells it to
you at a fixed price; you make fixed payments on it, with no penalty
for late payments. The bank paid a fixed price, you pay a fixed price,
interest (the increase in the amount of debt over time) is avoided.
With loans to a company, there are the regular payments, and there
are additional payments which are determined as a share of the
company profits. If the business does poorly, the bank doesn't get
much. If the business does well, the bank does. In effect, the
lender buys part of the business and gets the proportionate profits
until the capital is repaid. The marginal rate does not change over time:
if the payback period is set at one year (say), then the lender gets
the share of profits for that year, whether the company does well or not,
and the lender is not entitled to additional funds if the company
did not happen to do well.