Loans and Manufactories

[bly08]

Is taking loans to build manufactories worth it in this scenario?

1.) WC goal with 1k-2k development at tech 11 when textile manufactory first becomes available. ~1540s.
2.) 30-70 dev/year expansion rate for the rest of the game.
3.) Upstream expansion with Indian/Asia focus for TCs.
4.) Aiming to be at loan limit as WC finishes.
5.) 3% interest rate from admin ideas.
6.) Not sure if this is a good estimate but assume ~50 years to reach 90%+ trade power in each downstream node.
7.) Disregard inflation.

I am guessing that taking loans to build churches/workshops would still be unprofitable. But if loaning to build only manufactories is profitable, what is the rough cutoff for profit? I would assume the answer applies to both hordes (debasing and loaning) and normal tags.

 

[trojan1234]

I think I replied your post in other thread.

It's not profitable in most case.

Assume that you take 500 ducats loan to build manufacties. This gives you -15 ducats per year. Even if you build it on 4 ducat price goods, you have 100% production eff. and 100% trade eff(90% trade power multiplied by steering then efficiency in your end node etc), this would give you 8 (from prod.) plus 8 (from trade) ducats per year. In the end you have 16 ducats income and 15 ducats interest, total +1 ducats balance from doing so. This seems profitable but remember you pay 75 ducats of interests while constructing. So it takes 75 years to make it profit.

This is really rough assumption and calculation but you can do calculation up to your current efficiency and interest per annum.

 

[Bibor]

I did only one WC, but in my opinion cash is best spent on Monarch Points and the army.

 

[The_Seraph]

You lose 75 ducats at 3% interest, but make back 16 ducats per year. So after 10 years (build time + 5 years working) you profit 5 ducats. And every year after that you gain an additional 16 ducats. Obviously these are very generic numbers but I believe it is efficient to do but I don't know all the math as to when it's most efficient etc.

 

[trojan1234]

You lose 75 ducats at 3% interest, but make back 16 ducats per year. So after 10 years (build time + 5 years working) you profit 5 ducats. And every year after that you gain an additional 16 ducats. Obviously these are very generic numbers but I believe it is efficient to do but I don't know all the math as to when it's most efficient etc.

You need to renew the loan so you lose 150 ducats for the first 10 years and you make 80 ducats from the action " taking loan to build manufacturies".

 

[Dominion]

If your goal is to finish at your loan limit, then... yes?

I mean, what else would you pump that money into?

 

[Palatinus Germanicus]

Depends on where you build the manufactories. I don't think most people realize that the main impact manufactories can have on your economy, is trade income. -If you build them in the right places.

There's an economic map mode called 'trade value'. If you go in that, you'll see several colors, from green (most valuable), to yellow, and 2 shades of red. Dark/blood red is slightly more valuable than Kool-Aid red. You can mouse-over the provinces, and it'll say what the exact trade value is. It would be nice if this were listed & easily referenced in the ledger, but, whatever.

Anyway, you want to start building manufactories in places where A) there's highest trade value already, and B) those places should be in trade nodes where you're having some power. I.e., if it's some trade node way downstream, and you've got 12% power there, and that power makes no real difference to your trade income... don't bother building there. Build in places where you're going to transfer the trade (and collect it in the next node), or collect it right in that node. Btw, they'll also effectively increase your trade power, by virtue of the fact that the goods produced (& therefore trade value) is increasing, in your favor. -Your % of the pie for that node is thus increased. This translates to: Mo' money, mo' money.

Or course you get production income from manufactories... and you'll notice that increasing over time. But if you start building especially in the green (if you have any) or yellow provinces... then move onto the blood red ones (yes, still totally worth it)... your trade income will go up much more substantially. -Provided you've built them in nodes where you can actually profit from it. When you get into the red ones, you'll need to mouse-over, and find the ones that have higher value... start with highest, first. (again, where you at, ledger?)

But heck yeah, manufactories are superbly profitable, as long as you know what you're doing. Loans --> manufactories. More loans ---> more manufactories, etc.... is a perfectly viable strategy.

Whenever I see someone of this forum pooh-poohing manufactories, I just SMH, and think, "you just don't understand, son". It doesn't take long before you can start playing like Forrest Gump:

"We don't have to worry about money anymore, Forrest".

"Good. One less thing."

 

[trojan1234]

But heck yeah, manufactories are superbly profitable, as long as you know what you're doing. Loans --> manufactories. More loans ---> more manufactories, etc.... is a perfectly viable strategy.

It is viable but in limited situation.

Anyway, you want to start building manufactories in places where A) there's highest trade value already,.

You should build in provinces of highest price of trade goods not in province of highest trade value. For example, Constantinople have 7 ish trade value because of high base production but it produces grain - the worst trade goods.

B) those places should be in trade nodes where you're having some power. I.e., if it's some trade node way downstream, and you've got 12% power there, and that power makes no real difference to your trade income... don't bother building there. Build in places where you're going to transfer the trade (and collect it in the next node), or collect it right in that node. Btw, they'll also effectively increase your trade power, by virtue of the fact that the goods produced (& therefore trade value) is increasing, in your favor. -Your % of the pie for that node is thus increased. This translates to: Mo' money, mo' money.

Or course you get production income from manufactories... and you'll notice that increasing over time. But if you start building especially in the green (if you have any) or yellow provinces... then move onto the blood red ones (yes, still totally worth it)... your trade income will go up much more substantially. -Provided you've built them in nodes where you can actually profit from it. When you get into the red ones, you'll need to mouse-over, and find the ones that have higher value... start with highest, first. (again, where you at, ledger?)

I agree that manufactories should be built in upper stream but you miss real math here.

Let me do some quick assumption on numbers based on OP said.
Assume that main trade node is constantinople from 'Downstream in India/Asia' and that the furthest node is Indus/Goa from 1-2k dev in 1540.
No clearing Italian nations, East African nation yet.

We build a manufactories in province of price PG of trade goods, we are production leader so having 1.1 times goods produced. Even if we conquered all provinces along the way to Goa, you can't go 100% trade power all the nodes on the trade route because of upstream trade power propagation, hordes caravans, Italian light ships. So trade power is between 90% and 100% so let's say 95% for simplicity. Trade steering is 6-10% depending on how many merchants are in the trade nodes, let's say 8% in all nodes. At tech 14, trade efficiency would be 20% from tech, 20% from Burghers, 20% from ahead of time, 10% from merchant, plus NI and temporary modifiers.

So trade income increases from building manufactories would be PG * 1.1 * (0.95 * 1.08)^ 7 * 1.7 = 2.238 * PG

Meanwhile, production efficiency is 20% from tech, 20% from ahead of time, 10% from administrative gov., 50% from workshop. So at 0% LA, production income increases by 2.2*PG, at 25% LA does by 1.65*PG, at 50% LA does vy 1.1*PG.

This is the reasoning behind above I said 100% prod. eff. and 100% trade eff. In other words, 4* PG is for rough but quick calculation. You can see my assumption is very optimal. We don't have 20% ahead of time bonus, we don't count devastation, looted etc at all. This means taking 3% loan to build manufactories on 4 ducat PG provinces gives us 18 ducats per year(4.5*PG ideal case) or 16 ducats per year (4*PG optimal case), resulting repaying loans in 25 + 167 years ( 75/3 + 500/3) or 75 + 500(75/1 + 500/1) years. I know tech increases efficiency but this is really not worth imo. I'd rather wait to save up 500 ducats and build one, which will pay off the investment in 27 years or 33 years.

So I really doubt that taking loans to build manufactories is always profitable. Move your mouse and do quick calculation with your current numbers to see if it really worth it.

 

[Palatinus Germanicus]

Florryworry outlined a strategy where the idea was to get your interest rate down as low as possible, and it was basically an exploit. You really could make serious profits just from the loans vs. manufactories cost ratios alone, and eventually become so profitable, you would be unbeatable in MP... by virtue of the fact that you could send wave after wave (after wave) of (literally) never-ending mercenary armies, and you would eventually win -every time- via overwhelming economic might.

"Literally unbeatable", I think he said. So, if you ever play MP against someone that knows how to effectively implement that strategy, good luck.

 

[trojan1234]

Florryworry outlined a strategy where the idea was to get your interest rate down as low as possible, and it was basically an exploit. You really could make serious profits just from the loans vs. manufactories cost ratios alone, and eventually become so profitable, you would be unbeatable in MP... by virtue of the fact that you could send wave after wave (after wave) of (literally) never-ending mercenary armies, and you would eventually win -every time- via overwhelming economic might.

"Literally unbeatable", I think he said. So, if you ever play MP against someone that knows how to effectively implement that strategy, good luck.

Please read what the OP said - 3% interests from admin idea. I know what you mean, with econ idea, you have lower interest, lower build cost, higher efficiency so it can be profitable in more situation than in case wihtout econ idea. But it is out of topic.

 

[bly08]

@trojan1234 thanks for explaining the math.

A few other considerations:

1.) With tax, burgher/dhimmi interactions, war gold/reparations, etc, we can pay off most if not all loans with less than 3 renewals, and be debt free in 20 years.

2.) Assuming, very roughly, that we make an average profit of 150 ducats/month for the next 50 years from 1540 on, 20k worth of loans can be paid off in 11 years. 20k should be enough to build workshop + manufactories in all low autonomy 3.6PG (cloth) provinces.

with this in mind, assuming 1/year profit from 4PG optimal case, we pay 3% interest for 20 years and are then debt free after.

20 + 575/16 = 56 years.

the profit margin might be conservative since 50dev/year means roughly 5 more upstream trade nodes in 50 years.

 

[Quaade]

Yes and no... You have to pay interest, and which makes it less profitable... And as many are pointing out with buildings... They are rarely cost efficient if you look at the specific building paying itself back within the game time-frame... However with manufactories you spread an insti faster and you produce more money and goods, which can be quite profitable... And ppl tend to forget how to see the income increase from buildings in reality... Not as a way to pay the building (cost-benefit is still good to have in mind though) but as a means to increase army without going into negative...

First off, you always have cash lying around... Investing them makes you more cash which can support a larger army... Even a temple at 0.10 can support half or a whole infantry (can´t recall the upkeep)... So in the end, with enough buildings you can increase your army size without suffering from negative income during wars... However, if you lack cash... try to go to war with some OPM, just as an ally to your target... grab cash and war rep... at times you get 1k ducats from a silly war, which can build 2 manufactories... I only ever use loans to manufactories if I need to rush it... And only if I need one loan, like 200 ducats or so... Or if I need to get insti to happen faster or another part of my empire to get it spread faster...

Fun fact... You can actually build workshops and manufactories in africa and profit quite well from it... UI lies to you, despite it saying it will increase income with 0 it will increase income with the exact same as your other provinces... Important thing is dev and goods

 

[bly08]

In terms of army cost, we are maintaining/drafting only enough troops to keep up expansion rate. As long as we're expanding upstream the income gained from TC provinces will far outpace military needs. Monarch points eventually become the bigger bottleneck so there is no need to conquer faster than we can core, tech, and maintain <100 OE.

Workshops are profitable in Africa/non-upstream regions (assuming Ottoman), but unless we collect in Zanzibar and lose the steering bonuses, the trade bonus from manufactories is lost.

 

[SolSys]

... Even if you build it on 4 ducat price goods, you have 100% production eff. and 100% trade eff(90% trade power multiplied by steering then efficiency in your end node etc), this would give you 8 (from prod.) plus 8 (from trade) ducats per year ...

That is too many assumptions.
At 100%** production/trade efficiency you gain only 4 ducts from production and an additional 4 ducts from trade [provided 100% node control].


**unless by 100% you meant something other than the starting base 100% values.

 

[trojan1234]

@trojan1234 thanks for explaining the math.

A few other considerations:

1.) With tax, burgher/dhimmi interactions, war gold/reparations, etc, we can pay off most if not all loans with less than 3 renewals, and be debt free in 20 years.

2.) Assuming, very roughly, that we make an average profit of 150 ducats/month for the next 50 years from 1540 on, 20k worth of loans can be paid off in 11 years. 20k should be enough to build workshop + manufactories in all low autonomy 3.6PG (cloth) provinces.

with this in mind, assuming 1/year profit from 4PG optimal case, we pay 3% interest for 20 years and are then debt free after.

20 + 575/16 = 56 years.

the profit margin might be conservative since 50dev/year means roughly 5 more upstream trade nodes in 50 years.

Hmm I can't understand your point. Why do you mix your steady income and the balance from your action?

Let me take your number and make it simple to do a math.

We have steady income of 150ducats per mont or 1800 per year. This includes tax, prod, trade etc plus interaction free gold and war golds. I think this doesn't change no matter how you spend 20k that comes for next 11 years. And not enough ducats in your treasury atm.

First, let's do take loan and build in 1540. You need to pay 600 ducats interests per year in 1540-1545, 330 per year in 1545-1550 and 60 per year in 1550-1555. In total you pay 4950 ducats for interests. Your building will give you 16 ducats per year(as you said 4PG case and avg price of goods at 4) in 1545-1555. And you build 40 buildings (20k/500) so in 1555 you get 6400 ducats ( 16*40*10). So you will have 1450 in your treasury in 1555.

Second, let's save income and build. You have 1800 in 1541 and build 3 buildings. This will be done in 1546 and gives you 16*3*9 = 432. Similarly you build 4 in 1542, giving 16*4*8 = 512. 3 in 1543, giving 16*3*7 = 336. 4 in 1544, giving 16*4*6 = 384. This already give you 1664 ducats in addition to your steady income, which is more profitable than first scenario.

If I want to snowballing, then I would save gold and build, instead of taking loan and building, in your situation.

 

[trojan1234]

That is too many assumptions.
At 100%** production/trade efficiency you gain only 4 ducts from production and an additional 4 ducts from trade [provided 100% node control].


**unless by 100% you meant something other than the starting base 100% values.

Read the post below. I did exact math many times and setted 4 *PG rough estimation to quickly decide what to build.

EDIT. Hmm I think I misread. If you hover mose over production income, the shown efficiency is additive to base 100% iirc. So 100% eff means production incomes are 2 * trade value in the province assuming 0 LA.

 

[bly08]

Hmm I can't understand your point. Why do you mix your steady income and the balance from your action?

Let me take your number and make it simple to do a math.

We have steady income of 150ducats per mont or 1800 per year. This includes tax, prod, trade etc plus interaction free gold and war golds. I think this doesn't change no matter how you spend 20k that comes for next 11 years. And not enough ducats in your treasury atm.

First, let's do take loan and build in 1540. You need to pay 600 ducats interests per year in 1540-1545, 330 per year in 1545-1550 and 60 per year in 1550-1555. In total you pay 4950 ducats for interests. Your building will give you 16 ducats per year(as you said 4PG case and avg price of goods at 4) in 1545-1555. And you build 40 buildings (20k/500) so in 1555 you get 6400 ducats ( 16*40*10). So you will have 1450 in your treasury in 1555.

Second, let's save income and build. You have 1800 in 1541 and build 3 buildings. This will be done in 1546 and gives you 16*3*9 = 432. Similarly you build 4 in 1542, giving 16*4*8 = 512. 3 in 1543, giving 16*3*7 = 336. 4 in 1544, giving 16*4*6 = 384. This already give you 1664 ducats in addition to your steady income, which is more profitable than first scenario.

If I want to snowballing, then I would save gold and build, instead of taking loan and building, in your situation.

I see your point, but if using the no loan method, profit will be less than 1800/year average for the next 50 years. Income growth is better modeled linearly.

If we make 600 ducats/year or 50/month in 1540 or year 0, to get an average profit of 1800/year over 50 years we will be making 3000/year or 250/month in year 50. Equation is Y = 48x + 600. Area under curve = 90000 which is 1800/year average over 50 years. The final income of 3000 includes profit from manufactories, 40 manufactories x 16/year = 640/year. We can assume that 3000-640 = 2360/year of the final profit is passive/non manufactory related income growth. The average of the passive growth is (2360 - 600)/50 = 35.2/year.

Without loans and let's say we have 600 ducats saved in year 1, we build 1 manufactory, year 2 income is 600 + 35.2 which is only enough for one more. In year 5 we will have built 1 + 1 + 1 + 1 + 2 = 6 manufactories. Every 500/35.2 = 14.2 years we make enough from passive income to afford one more factory. Every 5 years we make enough from money left over from the 600/year starting income to build 1 more factory, this is assuming we have 0 net expenses.

In 1555 or year 15 we have 15 + 1 + 5 = 21 manufactories with no money saved, 5 manufactories are still being built. At around year 40 or 1580 we will have 40 running manufactories with about 600 + 35.2/year * 40 years + 40 factories * 16/year = 2648/year income. Assuming we stopped building in year 35, we will have around 13240 ducats saved.

In contrast, we take out 20k in year 0 to build 40 manufactories. We owe 20000*(1 + 0.03*5) = 23000. In the 5 years from 1540 - 1545 we make 600*5 + 35.2*5 = 3176. Our debt becomes (23000 - 3176)*(1 + 0.03*5) = 22798. From 1545 - 1550 after manufactories finish we make 600 + 35.2*5 + 16*40 = 1416/year income. (1416 + 35.2)*5 = 7256 ducats made total. Debt becomes 15542. Income in 1550/year 10 is 1416 + 35.2*5 = 1592, total money made from year 1550-1555 is (1592 + 35.2)*5 = 8136. Debt becomes 8517 with interest included on year 1555 which is paid off in 1560. We are thus debt free in year 20 with an income of 1416 + 35.2*20 = 2120/year. In year 40 we have (2120 + 35.2)*20 years = 43104 ducats saved.

So I think you're right that if we start with 1800/year income in 1540 then not loaning is better. But if we can only build one per year then taking loans seems better. There must be a break even point but I'm not sure how to find it.

Edit: by income I mean profit

 

[trojan1234]

I understand what you mean. If it takes too long to save 500 ducats to build, then taking loan will start make profit faster(assume that steady income repaying cost or loan).

I read your calculation, I am sorry you made several miscalcultation. Interests is 3% per year so taking 20k loan of 5 years means we owe 23k not 20.6k. etc.

I did calculation with your number. Taking 20k loan method will repay all loan in year 25 with 7.8k in treasury. Saving and building finishes building in year 20 and having 11k balance in year 25. Check the file for detail. You can change number to see your plan is efficient or not.

 

[TheMeInTeam]

Depends on where you build the manufactories. I don't think most people realize that the main impact manufactories can have on your economy, is trade income. -If you build them in the right places.

The math on building manufactories being a top profit option is unquestioned at this point as far as I know. Once someone's learned to not trust the UI wrt income they're an amazing deal. The issue is more whether the interest cost of a loan gives more total benefit than simply waiting to get the money and building the manufactory then.

The answer depends on how much trade value you can control vs lose to others steering/collecting, how much build cost you have, and whether you have interest rate modifiers.

Florryworry outlined a strategy where the idea was to get your interest rate down as low as possible, and it was basically an exploit. You really could make serious profits just from the loans vs. manufactories cost ratios alone, and eventually become so profitable, you would be unbeatable in MP... by virtue of the fact that you could send wave after wave (after wave) of (literally) never-ending mercenary armies, and you would eventually win -every time- via overwhelming economic might.

"Literally unbeatable", I think he said. So, if you ever play MP against someone that knows how to effectively implement that strategy, good luck.

Interest rate is floored at sub-1% by design, so calling it an "exploit" doesn't make sense. When you're sub-1%, taking out loans and constructing manufactories is almost immediately profitable (manufactory build time is the only time you're negative and that gets quickly beaten by increased income). Also, the number of loans you can take with such a low interest rate is ridiculous, so you quickly get a scenario where every province gets a manufactory in short order.

The downside is that most nations need to run some bad idea group choices to manage it, and in MP Catholicism doesn't have a lot else going for it (and Hindu has to sac its discipline or RCC to get this).

 

[bly08]

I understand what you mean. If it takes too long to save 500 ducats to build, then taking loan will start make profit faster(assume that steady income repaying cost or loan).

I read your calculation, I am sorry you made several miscalcultation. Interests is 3% per year so taking 20k loan of 5 years means we owe 23k not 20.6k. etc.

I did calculation with your number. Taking 20k loan method will repay all loan in year 25 with 7.8k in treasury. Saving and building finishes building in year 20 and having 11k balance in year 25. Check the file for detail. You can change number to see your plan is efficient or not.

Oops you're right, thanks for the file, will look at it later today.