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An Introduction To Consumer Credit Case Solution

Solution Id Length Case Author Case Publisher
1990 570 Words (4 Pages) Peter Tufano, Andrea Ryan, Daniel Schneider Harvard Business School : 209107
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Just Gumbo is a startup plan for a food truck. The estimated cost for an initial investment in vehicle and marketing is 50,000 USD. The food will be sold in the Baton Rouge, and the target market is local residents of the area. The food truck can be moved to different areas as per requirement and demand. The startup needs funding for running its operations initially. After the breakeven is achieved and the initial investment's cost is recovered, the business will be able to sustain by its generated revenues (Mariotti & Glackin, 2014).

Case Analysis for An Introduction To Consumer Credit

Among many consumer credit options for borrowing, the most feasible is Auto title lending. It is a secured lending alternative for borrowers who need quick cash. It does not include a lengthy credit approval process as in with traditional loans. Credit history requirements are not mandatory as the lender receives possession of the vehicle title as security for repayment. The options attractive for lenders are security and for the borrower are balloon payments and roll over facilities. This type of loan may not cover the entire cost of the business, but it's a good point to start. The vehicle itself is a source of revenue, and it can be pledged against the loan, which will give the lender a sense of security. The risky borrowers pledge collateral to reduce their riskiness, and since startups are generally considered riskier, the pledging would help in getting the loan (Udell & Berger, 1991).

The second option which can be used is informal lending. These types of loans are extended by family and relatives. They offer quick cash and do not have high requirements for proving credit worthiness of a borrower. The services of Virgin money can be taken for making a formal, written contract for the loan. As the startup begins to grow and revenues become stable, the borrower can start to repay the loan installments.

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