Termyn8or
Posts: 18681
Joined: 11/12/2005
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That's great LE, now all you need is a few people from Nigeria. A few widows and deposed leaders would fit in nicely.
But seriously, if this is serious I think what you mean is you invested in a bank. I hope it is not in the US, there are a few problems here. However you never know what kind of bailouts might be coming along.
I knew a couple of guys who were actually thinking of starting a bank. Perhaps twenty years ago. From what I can reckon their capitalization would be about two million USD, which is not much, but it is enough. Under the crazy US banking system they would be allowed to loan out ten times the actual capitalization, and that is back when they required 10%, now alot of banks are down to 3% or less. They should've done it, but did not for whatever reason and they wound up putting it into real estate instead.
I don't know what the market is like in the UK, but a bank here issuing a credit card that is a flat 10% and not double dipped would make good money. Right now doing home loans would be great with it being a buyer's market. Back then though, things were different. Just qualify the people properly and you make money. House values are so depressed right now though that even foreclosures can make you money. Might have to sit on them for a couple years, but they can't stay this low forever. But that is in the US.
If you have any control over the business, a flat rate, actually fair credit card policy would work. With a measely two million you could issue quite a few cards. When you outgrow your capitalization you borrow the additional money, either at prime or LIBOR and you keep the spread. The thing is, until your money runs out, you keep all the interest. You need something like an actuary to determine just how deep you go into that, plus if you don't rape the bank for all it's money, that capitalization level grows.
But see that is sound business, in the US they have a different plan, loan the money to their friends and never get it back and let the fed bail you out. Silverado is a classic case of that. Then when you get straightened out they make your brother a public official. Like a governor or president.
I'm sure things are different in the UK, so whatever I say cannot be taken as gospel.
I hope your million quid* a year guy is good. But this much is true, if you got a bank that doesn't gouge people like most banks do, it is likely to be quite popular. Want an idea or two ? Well one.
When the card goes over limit, instead of trying to kill the customer with charges, just charge the default rate, which is the legal limit, for the portion of the balance which is over the limit ONLY. Dammit I used my small card to get some auto parts and it went over by about a dollar. They charged me so much in bullshit fees that I paid the card off. Nice low interest, but the fees were ridiculous.
Then you can sell CDs and give like 4%, people would eat them up. That increases your capitalization, and even though you have to pay the 4%, it is stable, and that money is guaranteed to remain for it's term. Well almost, but of course you assess penalties for early withdrawal.
Good luck with it.
T
*Could someone tell me exactly what a quid is ?
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I always knew I'd be rich one day... - 
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