One of our better business loans that we were able to provide a customer was for his growing tobacco farm. While there are not many tobacco farms in the area, there are a few independent farms run by different farms. This is key, as the customer we offered a loan to wanted £650000 so he could purchase the remaining competitors and monopolise the industry in Guam.
Now, there is a misconception that monopolisation of an industry or market is illegal. It isn’t in most countries. The only times a monopolisation is illegal is for companies such as energy or gas providers, and even then, it’s mainly for western countries. The idea that a monopoly cannot be legal is fundamentally wrong, and sometimes, companies get around it by opening their own competitors under shell companies.
In Guam, monopolisation has never been illegal, but there is an unspoken rule that if you are to buy out a competitor, you must offer them the right to work on their previous location. This farmer was very generous in that he wanted to buy all the competitor farms, and still hire the original owners as the managers of those farms on a higher than average salary.
We decided that we would offer the loan, but on the condition that he had fewer years to pay it off than a standard loan, and on a 15% interest rate. We knew that we would make our side back since tobacco trade is still very popular around the world, but the reason we wanted the rate back sooner is due to the way he wanted to spend the loan.
When someone spends the loan within the space of a year, it’s always smarter to ensure that they pay back the loan in a fast time too. It saves on missing payments, or a completely default loan.