One Company’s Business Planning May Be Riskier than Banks

Those who choose to take the risks to operate a new business are often willing to explore new ways to re-invent the wheel. It is this willingness to consider new business planning ideas that can lead to either great success or devastating failure. There are likely many future business owners in Georgia who are searching for the right way to launch a new enterprise and may benefit from experienced professionals who can assist them in achieving their goals.

While there are many options to choose when looking for investment or loan opportunities, the failure of some large banking companies in 2008 may make some hesitant to take a chance on these traditional banks. That may be why LendingClub’s more innovative ideas attracted so many investors. The company set up its plan in such a way as to limit its credit risk by using investors’ funds for loans. In this way, it appeared to avoid the exposure of risk to its own capital. Unfortunately — the board members discovered — this did not lessen its chances of potential failure.

Changes in leadership, along with a few other factors, shook the confidence of many of its investors. The institution started to lose assets from which it would make loans. This led to it having to use its own reserves. As a result, it was less willing to originate those loans, which, in turn, led to a further decrease in revenue. None of these changes are conducive to a healthy bottom line.

A business does not deal so much with capital as it does with trust. Without the trust of investors and customers, the business will not survive. An entrepreneur may have a revolutionary idea or product, but without the right approach, the potential for success may never be realized. Future Georgia business owners who believe in their concepts can seek the experience of an attorney who is familiar in commercial law who can aid in the business planning model that might allow owners the greatest opportunity for success in the years to come. 

Source:, “The Biggest Risk to LendingClub’s Business Model“, John Maxfield, Feb. 21, 2017

Related Posts
  • Preventing Breach of Contract: Drafting Tips for Airtight Agreements Read More
  • When Running a Small Business, Don’t Forget Tax Matters Read More
  • Rounding out Your Advisory Team with Proven Legal Counsel Read More