Slicing Pie

            Loans and Credit Cards

            Sometimes, an individual uses personal credit to secure a loan on behalf of the company or puts expenses on their credit card. If the individual is making the payments on the loan, the money is treated as cash when the money is spent. If the loan is a lump sum for general purposes, it becomes part of the Well and slices are given when the money is drawn out. If the loan is used to buy something specific, the money is spent and converts immediately to slices.

            However, if the loan is being paid back by the company, instead of the individual, the individual does not receive any slices. Yes, the individual is taking risk for securing the loan with personal credit, but because they aren’t personally making the payments, they don’t receive any slices. At first, this may seem unfair, but it’s not.

            If someone gives you money and expects you to make regular payments, they are giving you a loan. It does not matter where the money comes from, all that matters is that the nature of the transaction is a loan. The individual would be within her rights to ask for interest on the loan, but they do not deserve a slice of the Pie. If they did receive a slice of the Pie, they would, in effect, be double-dipping from the Pie. The person providing the loan would be receiving Pie and the person paying or providing the cash to pay the loan would be receiving Pie. This just doesn’t work.

            So, loans and credit card expenses are treated as cash (4x) if the individual who provided the loan is making the payments. If the company is making the payments—with or without additional interest—no slices are granted.

            When cash-money is spent on behalf of the company, and the individual who provided the cash is not paid back the fair market value of the cash is equal to the cash spent. 

            Fair Market Value = Amount of Cash Spent

            Updated: 04 Apr 2016 11:22 AM
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