JD’s Lending No-No’s #4 and #5

by Johnny Debacle

Read JD’s Lending No-No’s #1a and #1b and JD’s Lending No-No’s #3 through #4. The focus today is on what can be gleaned from people who have financed Norman Hsu.

Lending No-No #4: Do not lend for a tenor of less than 6 months, getting a 40% return over that time frame, unless you fully expect that one of three outcomes will or has occurred: 1) you lose all your money 2) you are killed or 3) you are a killer.


Normas Hsu suckered people into providing him short term “bridge loans” that would return 40% in less than 6 months. The mostly nonsensical rationale for the bridge loans, was that they were needed for “for seasonal high-ticket, high-quality retail goods made in China for exclusive brand names.” These firms couldn’t get better financing than an 80%+ annualized rate? I’m sure the Triads would have gone lower. Amazingly, real people with real money poured millions into financing these bridge loans, apparently doing no due diligence and trusting a man with a warrant for grand theft outstanding on his head.

Lending No-No #5: Never neglect to perform due diligence, if you plan on writing a big check for too good to be true returns.


Following on the above situation, maybe if you are an investment firm, providing sketchy bridge loans to Chinese intermediaries, maybe, just maybe it makes sense to do a background check on that man. You know, see if he has, I don’t, a criminal record of scamming people>

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  1. bfellows
    September 12th, 2007 | 3:33 pm

    Does “He used to sleep on a park bench” count as due diligence?