From the shareholders’ perspective, they make a one-time purchase that can potentially make them massive profit with minimal effort on their part, but for the company, isn’t that like taking out a high-interest loan that they can never pay off? Wouldn’t an actual loan be better if they just need money?
In: Economics
Banks don’t like giving high risk loans. If you want to open a restaurant, they want to see a business plan, they can compare it to other restaurants in the area, see if it makes sense, evaluate the risk. If you want to develop property, they can look at what similar houses sell for, look at size of development, see if it all makes sense. If either of these businesses fail, the can reposes the equipment and property.
But something high risk, like developing a new type of software, the bank has much less idea how much the product will be worth, if it fails, they have no idea how to reposes the source code and sell it. Also, it will take years for software to be ready, so no way to make loan payments. So the bank just isn’t interested in making the loan.
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