You are reading a single comment by @Dramatic_Hammer and its replies.
Click here to read the full conversation.
Dramatic_Hammer-
That's not very capitalist though, when you could borrow more to cover losses or just phoenix the business.
It's a perfect system!
-
Yeah. I get it. But the whole of our corporate legal structures are basically built on limiting/allocating risk. It has laid the foundation of the sort of risk taking and entrepreneurial spirt that has made this back water island into a global player, and pretty much allowed all of us to be born into a privileged position globally.
So you know. Swings and roundabouts.
TooTallTim
hugo7
Investors too.
I would say that it's not just being doggy and fucking residents. Imagine what happens if you had say 5 blocks to build at £2om each. You can't secure the contractors to complete all in one go and you're financing them one by one for whatever reasons. If problems arise in the construction of one of them you want to limit the losses to that one block rather than risk all of them. Especially if say the total value of all the land could be at the level of the losses involved you could potentially loose everything.
I imagine very big developers borrow at fairly low rates. But smaller ones often pay quite a lot and have much smaller margins than most imagine.