Startup money

[Drew Cameron]

I went to a meeting two nights ago and heard a pitch for startup money. The basics of it were if you have a credit score of 680 or higher you can get up to $150,000 for a 10% flat fee up front and 0% interest for the remaining 12-24 months of the term. The total dollars and the length are determined solely on your credit score with no other factors like debt to income or assets considered. The worst case scenario is a 12 month term. This is only offered to members of a mentorship program that I am already involved in. The pitch was here in Phoenix, Arizona and seems almost too good to be true. In the mentorship program they have a level called arm chair investing when they bring you deals and joint venture for a 65% profit split going to the investor and 35% to the mentorship group. This group is involved with flips so the profits range from 20-50,000 per flip. The scenario is win win win. The investor gets funding for cheaper than hard money and the money is revolving for the term (in the form of credit cards at 0%), the group gets more students to mentor who couldn't otherwise afford the fees, and the financial company gets a bunch of new clients at 10% with little risk when the investors are getting walked through flips that earn thousands of dollars and are doing deals weekly. Am I looking at this scenario through rose colored lenses or is it really to good to pass up?

[Aaron K.]

First, it's not 0% financing.  You're immediately paying a 10% fee up front.  So you get 150k, 15k of that goes away on day 1, and your monthly payments are then $12,500 or $6250 per month after that (12 or 24 month term).  What investment will you make that will at least earn you back your $165k after 1 or 2 years, AND enable you to make those payments every month?