The backers - acquaintances, alumni or other accredited investors - provide funding that will typically range between $20,000 and $50,000 in exchange for an agreed share of the graduate's future income over a 10-year period.
Well, I am skeptical, but also glad someone decided to try it out - the chances are slim, but this is so unusual some unexpected good may yet come out of it.
"The backers - acquaintances, alumni or other accredited investors - provide funding that will typically range between $20,000 and $50,000 in exchange for an agreed share of the graduate's future income over a 10-year period. Upstart determines the portion of future annual income to be shared based on the total sum raised and the person's qualifications, including academic record and field of study."
I'm failing to see how this is any different than a loan, with the exception you can pay a loan back early AND you know how much you owe the lender. This just seems like for $100k (based on the 5 backers at the minimum $20k that is quoted above) you could be paying many times that for success that is unrelated to the money that you received.
Risk and reward. No bank is going to loan a company at this stage money and there's no guarantee the investors who are providing this money will get any return at all and there is no collateral, so the founders should pay more for the money.
See the wording for me makes it seem that the backers would get a percentage of ANY income that the person makes, regardless if it had to do with the project funded or not, for 10 years.
yeah, that's also how I read it; but I just see that as 'paying MORE' than you would on a regular loan.
Of course... depending on how they do the percentage, it could be, you know, a good problem to have; I mean, if you end up paying a percentage of a very large income, presumably those dollars have a lower marginal value to you than when you were just getting started. And wealthy contacts, especially wealthy contacts that have an interest in seeing you do well are an incredibly valuable thing to have.
And it really couldn't be too crushing on the low end, as it's not like student loans, these would be subject to bankruptcy.
I mean, it seems like a reasonable idea; at least, more reasonable than most student loans.
the typical loan given to a person of that age in America is... different from the sort of loan you or I might take out. It is guaranteed both by the government and the debtor. You can't get out of American student loans through bankruptcy.
Personally, I think this is incredibly destructive; Banks will loan money as 'student loans' to people they'd never think of giving similarly sized regular loans. People that obviously have little chance of paying the loan back.
Most risky loans require collateral and have legal stipulations that have pretty onerous consequences if the money isn't repaid, so there is a lot risk of default in typical loans and in that case, the bank gets something, which is thought to be of higher value than the monetary outlay.
Well, I am skeptical, but also glad someone decided to try it out - the chances are slim, but this is so unusual some unexpected good may yet come out of it.