does this investment opportunity sound legit?

[j0dan]

He does short-term bridge financing. 1-12 months typically. Typically to companies that get a large order and need the money to complete it. He says he typically takes collateral in the form of buildings, etc. but also takes the invoices (factoring anyone?). He lends out the money at 60% (the legal max) and gives the lenders a return of 12%. Big spread I know, but 12% isn't bad if it's "guaranteed". More guaranteed than my stock purchases anyway.

I still need to call the 6 references I have, and check him out with other people in the area, but I wanted to ask if this sounds like a real way to make money.

So based on the very limited information I have, what would you be concerned about? Is this a legitimate way of making money? How would you check the guy out? What questions would you ask his references?

Thanks RFD!

[Losmir]

This is a great deal.... for the guy doing it!

No liability since he's using your money and he gets 48% to boot. Sounds fishy to me.

[darren22]

i'll admit that i had already made up my mind when i read the subject line. if it sounds too good to be true, it is. personally, i'd be EXTREMELY suspicious of this. if it were really 12% guaranteed, this guy wouldn't need to go out and convince people to take his offer. we'd all be knocking down his doors. we're not.

[TheDude79]

He does short-term bridge financing. 1-12 months typically. Typically to companies that get a large order and need the money to complete it. He says he typically takes collateral in the form of buildings, etc. but also takes the invoices (factoring anyone?). He lends out the money at 60% (the legal max) and gives the lenders a return of 12%. Big spread I know, but 12% isn't bad if it's "guaranteed". More guaranteed than my stock purchases anyway.

I still need to call the 6 references I have, and check him out with other people in the area, but I wanted to ask if this sounds like a real way to make money.

So based on the very limited information I have, what would you be concerned about? Is this a legitimate way of making money? How would you check the guy out? What questions would you ask his references?

Thanks RFD!

I'd be concerned about the very limited information you have. The 60-12 spread also seems very suspicious. He's only giving you 20% of the revenue even though you're taking all of the risk..... doesn't sound right. Besides, I don't know of any company that would take out even short term secured financing at 60%. This could easily be a PONZI scheme.

If I were you, I'd call up this guy and ask him for a bigger cut of the profits commensurate with your risk. Then I'd ask him for 10 previous projects he's financed and the names of the companies. You'll have to do a lot of legwork to convince yourself that he's actually financed the projects he says he has by calling the project owners. If he can't provide those types of details or waffles at the suggestion, then I'd walk.

[Nav]

I'd be concerned about the very limited information you have. The 60-12 spread also seems very suspicious. He's only giving you 20% of the revenue even though you're taking all of the risk..... doesn't sound right. Besides, I don't know of any company that would take out even short term secured financing at 60%. This could easily be a PONZI scheme.

If I were you, I'd call up this guy and ask him for a bigger cut of the profits commensurate with your risk. Then I'd ask him for 10 previous projects he's financed and the names of the companies. You'll have to do a lot of legwork to convince yourself that he's actually financed the projects he says he has by calling the project owners. If he can't provide those types of details or waffles at the suggestion, then I'd walk.


it will be hard, if not impossible. I dont see that many companies would provide this type of information to someone that was calling "to check references".

From the point of view of the company, why should they tell an outsider where they got there financing from, and how much they paid/got screwed by in interest etc.

[Bullseye]

Why would any company that is not in danger of going bankrupt tomorrow need to pay 60% to borrow money?

If this is even legit, I'd say that 12% is very low for the risk involved. Especially compared to the stock market!

[15-20_God]

This could easily be a PONZI scheme.


that's the first thing I thought of. Any company borrowing at 60% for a short term loan won't be around for long. That's what credit facilities are for. did you meet this guy through a church group?

[TheDude79]

it will be hard, if not impossible. I dont see that many companies would provide this type of information to someone that was calling "to check references".

From the point of view of the company, why should they tell an outsider where they got there financing from, and how much they paid/got screwed by in interest etc.

I'm not suggesting you just call up a company and say "Hey guy, did Stevie Fastbucks lend you $50,000 at 60%pa?". However, you can call them up and say "Have you done business with Stevie Fastbucks? What kind of business? Is he reputable? Would you do business with him again?". People do this kind of thing all the time, it's called due diligence. Of course it's not easy, but if you want above-market returns on your money you have to expect to do some work to get them. Based on the OP's post, I'd sure want this kind of assurance before I gave a penny to a suspect-sounding enterprise.

[j0dan]

i'll admit that i had already made up my mind when i read the subject line. if it sounds too good to be true, it is. personally, i'd be EXTREMELY suspicious of this. if it were really 12% guaranteed, this guy wouldn't need to go out and convince people to take his offer. we'd all be knocking down his doors. we're not.

Very true. However 12% doesn't sound unreasonable. Except for the fact that he's lending out at 60%pa.

I'd be concerned about the very limited information you have. The 60-12 spread also seems very suspicious. He's only giving you 20% of the revenue even though you're taking all of the risk..... doesn't sound right. Besides, I don't know of any company that would take out even short term secured financing at 60%. This could easily be a PONZI scheme.

If I were you, I'd call up this guy and ask him for a bigger cut of the profits commensurate with your risk. Then I'd ask him for 10 previous projects he's financed and the names of the companies. You'll have to do a lot of legwork to convince yourself that he's actually financed the projects he says he has by calling the project owners. If he can't provide those types of details or waffles at the suggestion, then I'd walk.

Yes, he mentioned confidentiality regarding the projects he was currently financing, but would tell me which company MY money was going to if I invested.

Thanks for the mention of a PONZI scheme. I did some reading on that.

that's the first thing I thought of. Any company borrowing at 60% for a short term loan won't be around for long. That's what credit facilities are for. did you meet this guy through a church group?

If a loan at 60% is the difference from being able to make a sale or not, and your profit margin is high on the product, why not? Your widget costs may go up from $1 to $1.20 to cover the financing. People aren't buying a new car or boat with this type of loan.

Nope, not a church group. I've heard the horror stories though. Heard of him through a short chain of reputable people. Guess I need to further check up on them as well.

Why would any company that is not in danger of going bankrupt tomorrow need to pay 60% to borrow money?

If this is even legit, I'd say that 12% is very low for the risk involved. Especially compared to the stock market!

Great point about the risk involved. In the stock market we have far more checks and balances to protect from a 100% scam.

I'm not suggesting you just call up a company and say "Hey guy, did Stevie Fastbucks lend you $50,000 at 60%pa?". However, you can call them up and say "Have you done business with Stevie Fastbucks? What kind of business? Is he reputable? Would you do business with him again?". People do this kind of thing all the time, it's called due diligence. Of course it's not easy, but if you want above-market returns on your money you have to expect to do some work to get them. Based on the OP's post, I'd sure want this kind of assurance before I gave a penny to a suspect-sounding enterprise.

it will be hard, if not impossible. I dont see that many companies would provide this type of information to someone that was calling "to check references".

From the point of view of the company, why should they tell an outsider where they got there financing from, and how much they paid/got screwed by in interest etc.

^ Exactly my problem. That information would go a long way in assuring me, but if I was a company that got financing through him, I wouldn't like too many others knowing I did and at what rate.

[Sylvestre]

He does short-term bridge financing. 1-12 months typically. Typically to companies that get a large order and need the money to complete it. He says he typically takes collateral in the form of buildings, etc. but also takes the invoices (factoring anyone?). He lends out the money at 60% (the legal max) and gives the lenders a return of 12%. Big spread I know, but 12% isn't bad if it's "guaranteed". More guaranteed than my stock purchases anyway.

I still need to call the 6 [...]!

Again, why would a secure company need to go to this guy to borrow at the legal max? the ONLY reason for a company to do this is if they were denied all other forms of credit from other instituitions. And the only reason a company will be denied this is because they are very very risky (i.e. next to bankruptcy).
This isn't the diff. between a sale or not, it's the diff. between a sale and total collapse.

And if you are putting forward all the money, why are you only getting 20% of the return and he gets 80%? That 12% IS unreasonable. If you are getting all the risk and he's just negotiating, you should be getting 50-70% of the return.

And to be blunt, if you have never heard of a ponzi scheme, then avoid this!

[j0dan]

Again, why would a secure company need to go to this guy to borrow at the legal max? the ONLY reason for a company to do this is if they were denied all other forms of credit from other instituitions. And the only reason a company will be denied this is because they are very very risky (i.e. next to bankruptcy).
This isn't the diff. between a sale or not, it's the diff. between a sale and total collapse.

And if you are putting forward all the money, why are you only getting 20% of the return and he gets 80%? That 12% IS unreasonable. If you are getting all the risk and he's just negotiating, you should be getting 50-70% of the return.

And to be blunt, if you have never heard of a ponzi scheme, then avoid this!

So if I'm investing I'd probably want to see the collateral on the companies I'd be investing in.

When you put it that way, 12% sounds unreasonable, yes.

Lets say you're a building contractor and need $150k for 4 months until your contract gets paid up. You own a home worth $500k that already has a mortgage for $300-400k. What is the likelihood of a bank giving you a 150k loan for your business?

There's a first time to hear about everything. (even ponzi schemes aparently).

Thanks all of you. :)

[TheDude79]

Yes, he mentioned confidentiality regarding the projects he was currently financing, but would tell me which company MY money was going to if I invested.

If he won't tell you one company he's ever lent money to, how do you know he's even in the business he says he is? You have NO idea who he lends to, is it a reputable construction firm or a bunch of 13-year olds who have a 'really cool website', or better yet some shady dope dealers? Tell him you'd be happy to sign a Non-Disclosure Agreement just to know who his customers are.


If a loan at 60% is the difference from being able to make a sale or not, and your profit margin is high on the product, why not? Your widget costs may go up from $1 to $1.20 to cover the financing. People aren't buying a new car or boat with this type of loan.

The reason it is fishy is that if it was a guaranteed sale or a collateral-secured loan, the banks would be lined up to have
the company's business with a rate much much lower than 60%. Why would you as a debtor incur more costs than you need to? Slam dunks don't have 60% price tags, even personal unsecured LOCs have rates at least 5 times less than than from the big banks.



^ Exactly my problem. That information would go a long way in assuring me, but if I was a company that got financing through him, I wouldn't like too many others knowing I did and at what rate.
Make it simple: no info, no dough. And while you're at it, you should at least demand a 40% return off of his 60% loans.

[darren22]

I'm a bit surprised that most people here are at least advising OP to do his due diligence on this, and aren't telling him to just walk away. The latter would definitely be my instinct.

These comments aren't meant to be condescending or anything like that. I'm more curious about whether anyone out there has been in a similar position to OP and gone through with a somewhat shady sounding scheme (or at least done some research into such an "opportunity"). Do some of these things actually lead to happy endings?

[Atomic Chip]

He says he typically takes collateral in the form of buildings, etc. but also takes the invoices (factoring anyone?). He lends out the money at 60% (the legal max) and gives the lenders a return of 12%. Big spread I know, but 12% isn't bad if it's "guaranteed".

Perhaps I have misunderstood, but it sounds like he is (at least partially) protected by security interests, but your "guarantee" is limited to his verbal promise: or at best some sort of unsecured promissory note that would be difficult, perhaps impossible, to enforce.

[dlander]

Good news -- only the most credit worthy businesses take out short term secured lines of credit at 60%. I say go for it. Put in a few bucks. You'll learn a valuable lesson that last a lifetime.

[Atomic Chip]

Yeah, really. ;)

[TheDude79]

I'm a bit surprised that most people here are at least advising OP to do his due diligence on this, and aren't telling him to just walk away. The latter would definitely be my instinct.

These comments aren't meant to be condescending or anything like that. I'm more curious about whether anyone out there has been in a similar position to OP and gone through with a somewhat shady sounding scheme (or at least done some research into such an "opportunity"). Do some of these things actually lead to happy endings?
The family of a former girlfriend of mine were approached by an acquaintance who wanted them to lay down some cash for some "secret prospecting" he was doing. He wouldn't tell them anything about it due to confidentiality reasons but promised huge profits if it panned out. Given the lack of information they politely declined, and he went along to discover some of those fabulous diamond mines in the NWT that we all have heard about. Needless to say, they would have made out quite well had they agreed to fund his adventures. I know it's not quite the same situation as here, but sometimes these things are legit even though they seem fishy.

[j0dan]

Good news -- only the most credit worthy businesses take out short term secured lines of credit at 60%. I say go for it. Put in a few bucks. You'll learn a valuable lesson that last a lifetime.

I hope you don't mean a valuable lesson about who to trust. :)

Minimum buy in is 20k, but I can split it with others and do 10k.

[Bunkhouse]

google "Money laundering" to find out what your getting yourself into.

[Thalo]

I'm just gonna comment on this from a banker's perspective. The banks provide this sort of bridge financing to small businesses. For a creditworthy business with assets to back up the loan it would be far lower than 60%, even lower than 12%. I would question what sort of businesses this guy lends to that would go for 60% interest (and obviously were declined by banks). What happens to your 12% when the loan is defaulted on? Does your 12% disappear or does he absorb any losses with his 48% share?

[j0dan]

I'm just gonna comment on this from a banker's perspective. The banks provide this sort of bridge financing to small businesses. For a creditworthy business with assets to back up the loan it would be far lower than 60%, even lower than 12%. I would question what sort of businesses this guy lends to that would go for 60% interest (and obviously were declined by banks). What happens to your 12% when the loan is defaulted on? Does your 12% disappear or does he absorb any losses with his 48% share?

Thanks for giving me a bankers perspective.

Lets say a construction company that's less than 2 years old and hasn't shown a lot of income. They get a big contract and need 200k to finish it. Would you as a bank let him remortgage to 100% of the house, the car, the boat, and other bits and pieces to give him a loan? And then at what rate?

If they default, he will carry the risk. He's going to carry _all_ the risk up until he goes under. But like many things, I need to trust he is going to do that.

[TheDude79]

Lets say a construction company that's less than 2 years old and hasn't shown a lot of income. They get a big contract and need 200k to finish it. Would you as a bank let him remortgage to 100% of the house, the car, the boat, and other bits and pieces to give him a loan? And then at what rate? Nope, the bank is going to put a lien on the property that the construction company is working on, plus whatever other assets the company has available that are necessary to secure the loan.

If they default, he will carry the risk. He's going to carry _all_ the risk up until he goes under. But like many things, I need to trust he is going to do that.that's funny. Why does he even need your money then? If he's taking _all_ of the risk why wouldn't he take _all_ of the profits? Besides, it's likely that the point at which the debtor defaults on the loan is the same point at which your guy 'goes under', thus making his 'I take all the risk' guarantee worthless.

[Atomic Chip]

I hope you don't mean a valuable lesson about who to trust. :)

He can speak for himself, but as I read his post that is exactly his meaning.

Minimum buy in is 20k, but I can split it with others and do 10k.

It sounds to me like you are quite attracted to this scheme. That's fine: there is obviously no need to justify it to anyone else.

If $10,000 is not a life-or-death amount of money for you, then by all means go ahead with the gamble, and perhaps you will enjoy the last laugh.

[Capt.]

ya you're obviously trying to justify going forth with it so might as well just do it. My guess would be the money is used to try to turn a profit through gambling or drugs but who knows.

[advantage21]

If they default, he will carry the risk. He's going to carry _all_ the risk up until he goes under. But like many things, I need to trust he is going to do that.

I get the feeling you have already made up your mind on this one and my crystal ball tells me, in the not too distant future, you'll be posting a new thread asking for help on how to get your money back after being p'wnd.

[IronMac]

I'm going to agree with the last three guys here...you seem to have already made up your mind to get in on this. 12% for such a risky venture? You're better off putting your money into stocks.

[j0dan]

I'm just playing devils advocate. I'm a *long* way from having decided that this is worth it. I will continue to do my due dilligence for the learning experience, but as it stands I agree that it's not worth the risk.

[bluedcfive]

I'm just playing devils advocate. I'm a *long* way from having decided that this is worth it. I will continue to do my due dilligence for the learning experience, but as it stands I agree that it's not worth the risk.

hahah what due dilligence? you dont even know what your money is being used for