Is it a reasonable concern that you can get HELOC for 2.5%, business loans for next to nothing and investors are queuing up to throw money at any investment opportunity that promises more than 0.1%
So anybody who needs to go to a lending club and pay >10% have already been turned down by everyone else.
So is this junk bond profitable or sub-prime silly ?
I've pondered this a bit myself, but first clearly it's tax deductible - a business expense - I mean, even companies like Bell do preferred shares at 5+% - so a 14% loan, less corp tax, is still 'only' 10% or so.
Second, if a business has multiple owners, who do you want to take the money out of their HELOC? Seems like these are people who are buying out other stakeholders, maybe their money is already in the business, but the business is cash-flowing.
A decent business should make 20%+ I think.
They are relatively short term loans - 3, 4 years.
Banks can be pretty twitchy. Like, self employed? Come back in 3 years. Rapidly expanding business? Well, we need x years of accounts (yeah, by the time we have that many years of accounts, we won't NEED the money).
Don't know. I certainly wouldn't put *too* much money in. At the moment I'm thinking more than $50, but less than $1k, per loan. They are different companies, different industries, different provinces. Once you get to 10+ loans I think you're ok - VERY unlikely that the company will *immediately* go bust, even if they do after 2 years you've got a good chunk of your principal back.
I guess I'd like to have ~20 loans of $500 out there, averaging 10%, and assuming 1-2 will default at some point. So say $500 capital lost = $125 a year, but $1k in interest a year. On a rolling basis of course.
Not sure, but it seems worth a try. Better than a HISA.