Bill Me Later, Bill Me More

Jesse Mecham

April 5, 2016

The other day I was purchasing something and the only payment option was PayPal. I went through the process and then I was a little confused and I didn't see where I should click to be able to continue and actually purchase the software I was trying to buy.

Bill Me Later Is No Favor

And then I realized they were asking me if I wanted to pay for it later. I think it was a $40 purchase. "Do you want to do the Bill Me Later service?" And I think Bill Me Later is a service that they purchased, but they essentially wanted me to borrow the 40 bucks that I wanted to use to purchase this software and then pay them back, after they made a little bit of extra money from me.

The thing that bugged me most about it was that I had to explicitly opt out of the Bill Me Later option. Normally, when they introduce Bill Me Later, it is one option of several, "Here's one option and here's the normal pay option." This time, I had to say, "No—just let me do the normal process," and then that option came up and then I could carry on my way, and spend my $40.

Financing Is Big Business—At Your Expense

But have you noticed that many successful companies end up becoming a financing company? GE has a finance arm, a huge finance arm. PayPal is now a financing company. Car companies are actually financing companies. You have all these alternative lenders that are popping up and they're not payday lenders because that has a little bit of a stigma attached to it.

But services, like Cabbage, that are targeting small business owners, and saying, "Oh, yeah, we'll give you this dirt cheap loan or this..." Not dirt cheap, but super-fast. "We'll give you this really fast loan." So you say, "Oh, I'll borrow $10,000 through Cabbage," which is supposedly this working capital loan, and then you end up paying $14,000. And, now, PayPal is doing the same thing. They basically just take it out of your receipts, your PayPal receipts, to get their money back. And it's alarming.

It's alarming that it is becoming ever easier to borrow the money, and the terms less and less favorable.

Think Fast, Borrow Less

There's factoring, the people who have always done it for accounts receivable, where you can get to cash faster. But with big businesses that do real factoring, the terms aren't that bad. And if you're running a fairly sophisticated business and you recognize your cash-on-cash return and you see factoring as an option, it could be.

But this isn't factoring. This is payday lending for people that are in a service business. This is a payday loan for you, the photographer, or you, the designer, or you, the artist, or you, the construction contractor. And you're not able to collect as fast as you'd like so you borrow the money, just like an employee that isn't quite able to collect their paycheck as fast as they'd like so they borrow the money. The terms are horrendous.

You'll see this pop up a lot on Facebook ads right now. Drop a comment and give people a warning. But let's not pretend that it's something sophisticated. It's a payday loan targeted at a small business owner and it's horrible.

Delaying Payment Is Just Stealing From Your Future

A little bit of a rant there. I'm not totally anti-debt. I used debt when I purchased some real estate. But I'm very anti-debt that doesn't make sense. And most of the time, honestly, it really doesn't.

And at the end of the day, those payments can really get in the way of your first rule of giving every dollar a job and really prioritizing. You don't want to have half your priorities forced on you by the past version of you that ran up a big tab that you are stuck paying in the here and now.

So keep that in mind. When you go to borrow, you are basically saying, "The priorities that I have for the future are not as important as this priority that will be there in the future." Just be very careful. It's not sophisticated, it's not fancy. It's meant to extract extra money from you.

***Adapted from Podcast #214: One Year Same As Cash, the one in which Jesse gets annoyed warns against the dangers of "Bill Me Later."