A payday loan company offers to loan you money based upon repaying it and a service fee on your next payday. This often seems like a perfect solution until you look closer.

There is a simple reason as to why we are seeing more payday loan companies opening up and advertising so much. Payday loans are very profitable for those doing lending due to high interest rates and often end up being almost addictive for those borrowing money. A recent national survey of payday loan companies found that only 37% of companies accurately reflected their interest rate. At most places interest rates varied from 390% to 851% annually with average being 474%.

Once you get into a payday loan agreement it is often hard to get out of it due to amount that must be repaid at once. In fact 77% of people who borrow money from a payday loan company can not afford to repay it in full so they roll loan. When your loan is rolled a portion of total amount owed is paid and remaining amount of old balance, including old service fees, plus new service fees and interest rates are added on to a new loan. Obviously it is very difficult to pay down loan when so much more is being added on to what is owed.

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Publicly traded shells overcome two of three primary obstacles to becoming a U.S. public company. The private company avoids U.S. Securities Exchange Commission (SEC) initial registration review process. By buying a shell, private company reduces time it takes to go public from over one year to several weeks. The odds of a registration effort getting a SEC "Effective Letter" are better than even. Because shell is publicly trading, odds that shell will continue to trade are almost certain. Shells win on time and certainty issues.

THE PROBLEMS

However, buying a trading shell means dealing with a different set of problems. The Industry Axiom that there is no such thing as a clean shell is true.

1. Shells aren't clean because shell sellers usually hide shares or access to shares that will be sold after buyer takes possession of public company. The shell buyer tries to strengthen public company's share price. The past insiders sell undisclosed shares into this effort. 2. If shell has an operating history, there is always risk of litigation by SEC or by third parties. 3. Actions taken to clean up shell, such as reverse splits of stock are certain to antagonize existing public shareholders and their brokers, who are often company's market makers.

While professionals can help a shell buyer reduce these and related risks, they can't be eliminated.

REVERSE MERGERS

In an effort to overcome third primary obstacle to doing a SEC registration, most shells are sold as reverse mergers. The shell insiders and public retain their shares. The publicly traded Shell Company issues stock for private company that gives shell buyer over fifty percent control of trading shell. The shell insiders expect to make their money by selling their shares.

Without a doubt, a reverse merger is most costly way of going public in United States. It ensures that no knowledgeable investor will do a private placement financing of resulting public company. He knows that shell buyers will dump their stock into any rising price, thus depressing share price. He also knows that added investor relations’ costs of supporting all those extra shares will kill off company quickly. And failure to spend those funds will do killing just as effectively.

FALSE PERCEIVED SAVINGS.