Spongetech Delivery Systems Inc (fka SPNGQ)

[harvard homeboy]

You're not supposed to multiply the percentage by the number of periods...that's totally misleading.


Entities that start borrowing at usurious loan-shark interest rates -- and as we all know SPNG is having more than its fair share of cash flow problems these days -- never find a way of getting out of the hole other than declaring bankruptcy.

So the borrowing rates actually do annualize as the debt is rolled over month by month at interest rates of 4.7% per month and then compound out to the 57% interest rate I'd suggested.

Of course, the details that SPNG gave about its costs in the factoring agreement were few and far between so we don't know what SPNG's costs are for the factoring agreement.

What we do know, however, is that the guys who run SPNG are looking at all possible options to stay out of jail for writing bad checks, which I'd think would be a pretty good incentive to borrow, if possible, even if it meant paying the kind of interest rates only Tony Soprano could love.