When you owe the government money, you are a pariah. There are certain projects you no longer qualify for. The government automatically gets first lien position, so you are not eligible for any traditional financing. Your current lenders get really upset.
We never missed a payment to the IRS.
Finally we found an option to fully pay the IRS. It was an equally unsavory option. I calculated the cost of an IRS debt to be approximately 15% annually. This alternative option cost 46% annually. But the shadow cast by the IRS was also very expensive. We could not move forward as a firm or individually until it was removed. And we lived in fear of the consequences of missing a payment.
So we chose the daily payment loan. The way this loan works, it is completely unsecured. So they don’t care about the debt to the IRS. That’s the good part. They will loan you money and the way its calculated, you will end up paying about 25% more than you borrow. They draft a payment every day from your bank account, so the effective rate is 46%, because you have paid more than 10% of the principle back within the first month. It seems illegal. If its not it should be.
These people are really sleazy to talk to as well. They like to give you stories of all the people who got rich borrowing from them. But in reality they try to give you a second loan to pay for the first one, and so on, and so on.
We understood what it was and why we did it. It did feel good to present the IRS agent with a final check.
We never missed a payment with the daily payment lender either. A year later it was all over. We finally had a financially stable firm. We finally had a good, unified team and we had many good processes in place and many more in progress.
We had learned so many lessons. We were battle hardened businessmen at that point. We didn’t set out to learn those lessons. But we will never forget them. It was a long road.
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