Spongetech Delivery Systems Inc (fka SPNGQ)

[harvard homeboy]

I believe it will prove exactly the opposite. If the business was good and the margins were high enough to to grow the business even under the weight of high capital costs, the question then becomes; "Why do this at all? It seems short sighted and unnecessary." Its a desperation move. Clearly no business would pay this kind of interest for working capital IF they could get money through traditional sources. The conclusion is that SPNG cannot access traditional capital markets and, therefore, must use the business form of "Payday Loans."

Business doesn't survive by doing things just because they can afford to do them. It survives by using capital and resources at the lowest cost possible to generate more capital and resources. Factoring is the worst, highest cost capital available.


Thanks pantherj. The stuckholders in this company just don't get it. If you have a company that's borrowing money at interest rates of 57% per year, and is using those funds to manage a business with pretax margins of 20% per year, that's a negative arb.

Rinse and repeat often enough and you file for bankruptcy.