Are you paying too much interest ? Interest vs. Opportunity
Many people looking to start a paintball field or looking to expand their paintball business are concerned about paying too much in interest rates. Part of this challenge is that we are bombarded with real estate interest rates all the time, 3.5% is all we see at the banks, hear on the radio and see on TV. However a businesses loan is in a different solar system than a house loan.
As you may have heard, over 85% of new businesses fail in the first 3 years ( our Paintball Franchise has a 100% success rate, but that’s a different blog). The point is, loaning unsecured money to a business is a huge risk, vs. a car loan or a house loan. Simply because the house isn’t going anywhere and with cars they can get them back fairly easily. With a business loan it’s next to impossible to collect when someone goes out of business. For this reason, start up and working capital loans require a higher interest rate to off set the risk, plain and simple.
So, how much is too much? I must point out that standard VC ( Venture Capitalist ) interest rates are 40% PER YEAR and they take ownership and control of your company. They do this to insure they get their 40%. VC’s sound really exciting and glamorous but there is much more than meets the eye. A great book about this that is a fun roller coaster read is Ryan Blairs Nothing to Lose and Everything to Gain.
Recently a paintball field owner called me and said he ran the numbers on his loan that he just paid off. He said, “ Evan, I just paid over $10,000 in interest, that’s too much! “ So I said, have you ever looked at how much interest your paying on your home loan? Then I asked him what his sales for the year was, he said “approx. $500,000.” He grew from $350,000 the year before. Then I said, don’t you think $10,000 is a small price to invest to get a thriving business that does $500,000 a year? Plus his entire payment and interest was all tax deductible. He then replied “ Wow, I never thought of it that way, your right, I got a great deal.” You see without his start up loan, he could have never started his business.
The bottom line is this: interest vs. opportunity. I believe the opportunity of owning a thriving paintball business is worth paying a little interest for. If your looking for start up financing for your paintball field or need working capital to expand, call my direct line at 310-750-6219 or e-mail evan@moneypaintball.org