

Turned Down By Big Banks, Small Firms Turn To Purchase Order Financing - jsm386
http://www.nytimes.com/2010/01/31/business/smallbusiness/31order.html?8dpc

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iamelgringo
Okay, two things:

 _But his money doesn’t come cheap. It’s typically 3.5 percent for the first
30 days, and 1.25 percent for every 10 days after that, an annualized
percentage north of 40 percent. Most loans, he says, are repaid within 60
days._

Holy Crap! 40% annualized percentage rate. That's extortion.

But,

 _Last year, Hartsko lent roughly $150 million, compared with $84 million in
2008 and $60 million the year before that, he said. He estimates that the
company will lend about $240 million this year. Profit, he says, was in the
“high six figures” in 2009._

He's making a high six figure profit ( or < $1 million ) on $150 million of
lending, but charging an annual percentage of %40 on what he's lent, something
doesn't add up.

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aaronblohowiak
Hmm, I think you might be oversimplifying it. If most loans are repaid very
quickly, it would drastically reduce the profitability of the lend. So,
lending out 1 million dollars 150 times consecutively in one year could be
doable, you'd never hit the higher interest rates, and you'd still be able to
claim you lent 150M dollars.

