The 0-55 Rule and Commercial Bankers

Over at Barron’s, Randall Forsyth posits that banks nowadays are no longer playing by the “3-6-3” rule (pay 3% on deposits, collect 6% on loans, and hit the golf course by 3 PM), but by a more pernicious rule: the 0-55.

The 0-55 rule works like this: borrow from the Fed at 0%, collect 0.55% interest on short-term treasury securitites with no risk, and … nothing. That’s it. Don’t bother lending out to businesses or consumers.

Well … boo. But you can’t blame them for responding to incentives, I guess.

Here at RevenueLoan, our incentives (and constraints) mean that we MUST invest our funds into revenue-based financings for small, growing businesses. So if your local megabank is too busy robbing from Peter to pay Paul (er, borrowing from Ben to lend to Timmy?) to write you a small business loan — maybe you should apply online with us.

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About rlucas
Current entrepreneur and investor at RevenueLoan, doing growth financing for small businesses. Formerly with VC firm Voyager Capital in Seattle, startup Tercent, Inc. in Portland, and a variety of tomfoolery in Boston, MA (primarily skipping classes at Harvard to go down the river to MIT).

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