There is some confusion here Xeroe,
Your answer to my question regarding a $700,000 loan made from Helio to a crypto secured 3% 3 year loan - when I asked what the lenders Net Profit on this loan is . . . . and you answered $21,000 plus Helio's cost isnot correct.
1. Helio is the lender to the end secured party who gets that $700,000 loan for 3% for 3 years.
2. The end secured party pays Helio 3% PER YEAR on the balance due - so the most the secured borrower would pay is $21,000 x 3 years - is $63,000 and less if they make regular payments on the loan.
3. So the most Helio would get is $21,000 in interest per year. However Helio doesn't have that money - so Helio takes that $700,000 to lend out from its credit line and pays interest on the Helio credit line and that interest is ????
4. But my question was what is the net Profit to the lender (that is Helio). So its not $21,000 a year - its $21,000 a year minus Helio's cost for the $700,000 it lent out + its costs fees, labor, office expenses etc. etc. etc. to get to the net profit (not gross profit).
5. My point in my question is that Helio would have to be making large quantity of loans that are so low (3%) in order to keep its doors open much less be profitable (remember there is also interest paid out to depositors from Helio of crypto Helio holds for depositors.
6. You see many companies - car companies, window manufacturers, etc. etc. that offer low interest or no interest incentives for people to buy their products. And the cost of those incentives is paid because large sales at high profits are made. However - Helio is not a retailer or manufacturer - so any money it lends out cheaply has to be paid for from its narrow profit between gross costs to lend it (its money supplier) and net profits created and paid back from the end secured borrower.
7. so how is it any different than a bank? Well a bank borrows money from the FED at half of one percent or maybe as high as 1 % so there is a lot of room for net profits if it lends it out at 3% or more. In addition - depositors of money in a bank typically are getting from .2% to .8% on their money - not the 2% to 3% Helio is paying on deposited crypto. those are huge differences comparing a banks cost of money compared to Helio's.
So my point is - Helio makes a very tiny amount of net profit on a secured crypto loan that is a $700,000 3% loan. A bank would make 8 to 10 times more. So that appears to mean Helio will need to make many times more loans to do the same as a similar sized bank that is working with secured loans - or it would need to have much higher interest rate charges to the secured borrower than 3%. Why? Because whether Helio pays crypto depositors or pays its credit line - 3% loans is probably almost what Helio is paying to the sources it got the money from - because no one is only charging Helio 1% interest - its more in the 2% to 3% range (at best rates). Unless of course - Helio is only getting a finder's fee which would be even smaller.
If Helio had products it was selling - the profit made on those sales justifies really low interest rate outgoing loans - but I know of no monthly fees or sales Helio makes that provide those types of profits.
JMHO
