Extraordinary claims require extraordinary evidence but the article provides none, and the study's the article links to are behind a paywall.
Are you saying that if a big company can borrow at 'fed rate' + 2% and a small company can only borrow at 'fed rate' + 6% that as the fed rate gets smaller the relative differences in the borrowing rates increases so 8% vs 12% isn't as big of an advantage as 3% vs 7%?
Of course, large businesses can generally borrow at lower rates, but that's the way "risk" works.
Either way, as far as I understand they are independent variables to the absolute value of federal fund rate -- what matters more is the stage in the business cycle.
I'd go a step further and say the vast majority of startups borrow money from traditional banks, through home equity, business loans or credit cards.
The startup world is far larger than the stuff we read about on Demo Day.
If you watch the videos on Sweetbridge, reducing the WACC for startups and small businesses is one of the main promises of DLT.
What constitutes a "fair rate", though?
Despite popular opinion, banks are pretty damn good at assessing risk. The fact of the matter is, most small business fails. The rates reflect that.
Sweetbridge looks interesting, but the risk falls somewhere, even if more diffuse.
OK but if you look at only the small businesses that are going to go on to succeed and be around for the next couple hundred years, they still can't borrow at the same rates as Apple or whatever.
This is obviously correct. But it contradicts the idea that banks are good at assessing risk, if the closest that banks can come is lumping 100% of startups into a 'startup' bucket.
If banks really were good at assessing risk then the fact that the large tech companies have access to cheap capital wouldn't necessarily hurt startups, but that isn't actually the case.
I've personally experienced this recently trying to borrow money to acquire an asset: banks will throw money at you hand over fist, at amazingly cheap rates, if you structure things so that it's very very unlikely they will lose their money.
If you set up a company tomorrow with no assets, no cashflow, no nothing. Just an idea. And you go ask for a $100,000 loan. Why should a bank give you a loan, given most businesses fail?
It's 10 to 100x more risky to give a loan to a startup like that, than it is to give a loan to a profitable business that has existing cashflow and profits. Even if the interest rate is 20% for the startup and 3% for the established company.
But specifically how does that relate to start-ups and hurting growth?