Thread: Tesla Model 3
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Old 12-12-2018, 04:32 PM   #823 (permalink)
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Originally Posted by redpoint5 View Post
What's wrong with traditional lending if capital needs to be raised? Use the business as collateral.
First, that puts all the risk of lending on a single entity. Few would have the capital to lend for large projects, and few would be willing to accept the risk that a single failure would wipe them out. With stock, the risk is spread over many people, so that (at least if one diversifies), the loss from any single failure is small.

Second, that puts all the profit in the pockets of the few large lenders. With stocks (and mutual funds &c) those profits, like the risks, can be spread over a large number of small investors.

Finally, those small investors need not have large chunks of capital lying around in order to start reaping the benefits of investing.
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